Item 1. FINANCIAL STATEMENTS.

UNITED AIRLINES HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

(In millions, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating revenue:
Passenger revenue	$	6,637	$	1,649	$	13,319	$	9,395
Cargo	519		422		1,622		1,088
Other operating revenue	594		418		1,501		1,460
Total operating revenue	7,750		2,489		16,442		11,943

Operating expense:
Salaries and related costs	2,487		2,229		6,987		7,354
Aircraft fuel	1,710		508		3,793		2,474
Depreciation and amortization	623		626		1,866		1,859
Landing fees and other rent	652		500		1,735		1,552
Regional capacity purchase	520		425		1,546		1,550
Aircraft maintenance materials and outside repairs	346		115		917		659
Distribution expenses	218		53		442		379
Aircraft rent	58		50		165		147
Special charges (credits)	(1,098)		(1,081)		(3,423)		(2,467)
Other operating expenses	1,197		679		3,028		2,660
Total operating expense	6,713		4,104		17,056		16,167
Operating income (loss)	1,037		(1,615)		(614)		(4,224)

Nonoperating income (expense):
Interest expense	(449)		(345)		(1,228)		(712)
Interest capitalized	18		16		57		54
Interest income	11		8		30		45
Unrealized gains (losses) on investments, net	(34)		15		91		(295)
Miscellaneous, net	20		(411)		(48)		(1,317)
Total nonoperating expense, net	(434)		(717)		(1,098)		(2,225)
Income (loss) before income taxes	603		(2,332)		(1,712)		(6,449)
Income tax expense (benefit)	130		(491)		(394)		(1,277)
Net income (loss)	$	473	$	(1,841)	$	(1,318)	$	(5,172)

Earnings (loss) per share, basic	$	1.46	$	(6.33)	$	(4.10)	$	(18.91)
Earnings (loss) per share, diluted	$	1.44	$	(6.33)	$	(4.10)	$	(18.91)

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


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UNITED AIRLINES HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	473	$	(1,841)	$	(1,318)	$	(5,172)

Other comprehensive income (loss), net of tax:
Employee benefit plans	(9)		250		17		(292)
Investments and other	(1)		—		(2)		1
Total other comprehensive income (loss), net of tax	(10)		250		15		(291)

Total comprehensive income (loss), net	$	463	$	(1,591)	$	(1,303)	$	(5,463)

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


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UNITED AIRLINES HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except shares)


	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	19,256	$	11,269
Short-term investments	166		414
Restricted cash	254		255
Receivables, less allowance for credit losses (2021 — $70; 2020 — $78)	1,709		1,295
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2021 — $532; 2020 — $478)	955		932
Prepaid expenses and other	717		635
Total current assets	23,057		14,800
Operating property and equipment:
Flight equipment	39,312		38,218
Other property and equipment	8,633		8,511
Purchase deposits for flight equipment	2,179		1,166
Total operating property and equipment	50,124		47,895
Less — Accumulated depreciation and amortization	(17,996)		(16,429)
Total operating property and equipment, net	32,128		31,466

Operating lease right-of-use assets	4,697		4,537

Other assets:
Goodwill	4,527		4,527
Intangibles, less accumulated amortization (2021 — $1,532; 2020 — $1,495)	2,815		2,838
Restricted cash	215		218
Deferred income taxes	519		131
Investments in affiliates and other, less allowance for credit losses (2021 — $611; 2020 — $522)	1,336		1,031
Total other assets	9,412		8,745
Total assets	$	69,294	$	59,548

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UNITED AIRLINES HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except shares)


	September 30, 2021		December 31, 2020
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	2,199	$	1,595
Accrued salaries and benefits	2,207		1,960
Advance ticket sales	6,363		4,833
Frequent flyer deferred revenue	2,129		908
Current maturities of long-term debt	2,269		1,911
Current maturities of operating leases	569		612
Current maturities of finance leases	116		182
Other	1,083		724
Total current liabilities	16,935		12,725

Long-term debt	31,520		24,836
Long-term obligations under operating leases	5,163		4,986
Long-term obligations under finance leases	250		224

Other liabilities and deferred credits:
Frequent flyer deferred revenue	4,088		5,067
Pension liability	2,180		2,460
Postretirement benefit liability	961		994
Other financial liabilities from sale-leasebacks	1,406		1,140
Other	1,360		1,156
Total other liabilities and deferred credits	9,995		10,817
Commitments and contingencies
Stockholders' equity:
Preferred stock	—		—
Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 323,806,610 and 311,845,232 shares at September 30, 2021 and December 31, 2020, respectively	4		4
Additional capital invested	9,094		8,366
Stock held in treasury, at cost	(3,814)		(3,897)
Retained earnings	1,271		2,626
Accumulated other comprehensive loss	(1,124)		(1,139)
Total stockholders' equity	5,431		5,960
Total liabilities and stockholders' equity	$	69,294	$	59,548

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


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UNITED AIRLINES HOLDINGS, INC.

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)

(In millions)


	Nine Months Ended September 30,
	2021		2020
Cash Flows from Operating Activities:
Net cash provided by (used in) operating activities	$	2,336	$	(1,956)

Cash Flows from Investing Activities:
Capital expenditures, net of flight equipment purchase deposit returns	(1,571)		(1,630)
Purchases of short-term and other investments	(47)		(552)
Proceeds from sale of short-term and other investments	271		2,182
Other, net	23		10
Net cash provided by (used in) investing activities	(1,324)		10

Cash Flows from Financing Activities:
Proceeds from issuance of debt, net of discounts and fees	11,098		12,730
Proceeds from equity issuance	532		1,135
Payments of long-term debt, finance leases and other financing liabilities	(4,632)		(1,017)
Repurchases of common stock	—		(353)
Other, net	(27)		(19)
Net cash provided by financing activities	6,971		12,476
Net increase in cash, cash equivalents and restricted cash	7,983		10,530
Cash, cash equivalents and restricted cash at beginning of the period	11,742		2,868
Cash, cash equivalents and restricted cash at end of the period (a)	$	19,725	$	13,398

Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through the issuance of debt, finance leases and other	$	801	$	1,513
Lease modifications and lease conversions	111		503
Right-of-use assets acquired through operating leases	627		64
Notes receivable and warrants received for entering into aircraft and other ancillary business agreements	129		—

(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:


Current assets:
Cash and cash equivalents	$	19,256	$	13,150
Restricted cash — Current	254		76
Restricted cash — Non-Current	215		172
Total cash, cash equivalents and restricted cash	$	19,725	$	13,398

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


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UNITED AIRLINES HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (UNAUDITED)

(In millions)


	Common Stock			Additional Capital Invested		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount
Balance at June 30, 2021	323.6	$	4	$	9,042	$	(3,832)	$	804	$	(1,114)	$	4,904
Net income	—	—		—		—		473		—		473
Other comprehensive loss	—	—		—		—		—		(10)		(10)
Stock-settled share-based compensation	—	—		69		—		—		—		69
Stock issued for share-based awards, net of shares withheld for tax	0.2	—		(17)		18		(6)		—		(5)
Balance at September 30, 2021	323.8	$	4	$	9,094	$	(3,814)	$	1,271	$	(1,124)	$	5,431

Balance at December 31, 2020	311.8	$	4	$	8,366	$	(3,897)	$	2,626	$	(1,139)	$	5,960
Net loss	—	—		—		—		(1,318)		—		(1,318)
Other comprehensive income	—	—		—		—		—		15		15
Stock-settled share-based compensation	—	—		169		—		—		—		169
Issuance of common stock	11.0	—		532		—		—		—		532
Warrants issued	—	—		99		—		—		—		99
Stock issued for share-based awards, net of shares withheld for tax	1.0	—		(72)		83		(37)		—		(26)
Balance at September 30, 2021	323.8	$	4	$	9,094	$	(3,814)	$	1,271	$	(1,124)	$	5,431

Balance at June 30, 2020	291.0	$	3	$	7,307	$	(3,899)	$	6,365	$	(1,259)	$	8,517
Net loss	—	—		—		—		(1,841)		—		(1,841)
Other comprehensive income	—	—		—		—		—		250		250
Stock-settled share-based compensation	—	—		38		—		—		—		38
Warrants issued	—	—		40		—		—		—		40
Stock issued for share-based awards, net of shares withheld for tax	—	—		(2)		1		—		—		(1)
Balance at September 30, 2020	291.0	$	3	$	7,383	$	(3,898)	$	4,524	$	(1,009)	$	7,003

Balance at December 31, 2019	251.2	$	3	$	6,129	$	(3,599)	$	9,716	$	(718)	$	11,531
Net loss	—	—		—		—		(5,172)		—		(5,172)
Other comprehensive loss	—	—		—		—		—		(291)		(291)
Stock-settled share-based compensation	—	—		80		—		—		—		80
Issuance of common stock	43.7	—		1,135		—		—		—		1,135
Repurchases of common stock	(4.4)	—		—		(342)		—		—		(342)
Stock issued for share-based awards, net of shares withheld for tax	0.5	—		(58)		43		(3)		—		(18)
Warrants issued	—	—		97		—		—		—		97
Adoption of new accounting standard (a)	—	—		—		—		(17)		—		(17)
Balance at September 30, 2020	291.0	$	3	$	7,383	$	(3,898)	$	4,524	$	(1,009)	$	7,003

(a) Transition adjustment due to the adoption of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses.

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


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UNITED AIRLINES, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

(In millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating revenue:
Passenger revenue	$	6,637	$	1,649	$	13,319	$	9,395
Cargo	519		422		1,622		1,088
Other operating revenue	594		418		1,501		1,460
Total operating revenue	7,750		2,489		16,442		11,943

Operating expense:
Salaries and related costs	2,487		2,229		6,987		7,354
Aircraft fuel	1,710		508		3,793		2,474
Depreciation and amortization	623		626		1,866		1,859
Landing fees and other rent	652		500		1,735		1,552
Regional capacity purchase	520		425		1,546		1,550
Aircraft maintenance materials and outside repairs	346		115		917		659
Distribution expenses	218		53		442		379
Aircraft rent	58		50		165		147
Special charges (credits)	(1,098)		(1,081)		(3,423)		(2,467)
Other operating expenses	1,197		679		3,027		2,659
Total operating expense	6,713		4,104		17,055		16,166
Operating income (loss)	1,037		(1,615)		(613)		(4,223)

Nonoperating income (expense):
Interest expense	(449)		(345)		(1,228)		(712)
Interest capitalized	18		16		57		54
Interest income	11		8		30		45
Unrealized gains (losses) on investments, net	(34)		15		91		(295)
Miscellaneous, net	21		(411)		(48)		(1,317)
Total nonoperating expense, net	(433)		(717)		(1,098)		(2,225)
Income (loss) before income taxes	604		(2,332)		(1,711)		(6,448)
Income tax expense (benefit)	130		(491)		(394)		(1,277)
Net income (loss)	$	474	$	(1,841)	$	(1,317)	$	(5,171)

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


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UNITED AIRLINES, INC.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	474	$	(1,841)	$	(1,317)	$	(5,171)

Other comprehensive income (loss), net of tax:
Employee benefit plans	(9)		250		17		(292)
Investments and other	(1)		—		(2)		1
Total other comprehensive income (loss), net of tax	(10)		250		15		(291)

Total comprehensive income (loss), net	$	464	$	(1,591)	$	(1,302)	$	(5,462)

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


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UNITED AIRLINES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except shares)


	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	19,256	$	11,269
Short-term investments	166		414
Restricted cash	254		255
Receivables, less allowance for credit losses (2021 — $70; 2020 — $78)	1,709		1,295
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2021 — $532; 2020 — $478)	955		932
Prepaid expenses and other	717		635
Total current assets	23,057		14,800
Operating property and equipment:
Flight equipment	39,312		38,218
Other property and equipment	8,633		8,511
Purchase deposits for flight equipment	2,179		1,166
Total operating property and equipment	50,124		47,895
Less — Accumulated depreciation and amortization	(17,996)		(16,429)
Total operating property and equipment, net	32,128		31,466

Operating lease right-of-use assets	4,697		4,537

Other assets:
Goodwill	4,527		4,527
Intangibles, less accumulated amortization (2021 — $1,532; 2020 — $1,495)	2,815		2,838
Restricted cash	215		218
Deferred income taxes	491		103
Investments in affiliates and other, less allowance for credit losses (2021 — $611; 2020 — $522)	1,336		1,031
Total other assets	9,384		8,717
Total assets	$	69,266	$	59,520

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UNITED AIRLINES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except shares)


	September 30, 2021		December 31, 2020
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable	$	2,199	$	1,595
Accrued salaries and benefits	2,207		1,960
Advance ticket sales	6,363		4,833
Frequent flyer deferred revenue	2,129		908
Current maturities of long-term debt	2,269		1,911
Current maturities of operating leases	569		612
Current maturities of finance leases	116		182
Other	1,087		728
Total current liabilities	16,939		12,729

Long-term debt	31,520		24,836
Long-term obligations under operating leases	5,163		4,986
Long-term obligations under finance leases	250		224

Other liabilities and deferred credits:
Frequent flyer deferred revenue	4,088		5,067
Pension liability	2,180		2,460
Postretirement benefit liability	961		994
Other financial liabilities from sale-leasebacks	1,406		1,140
Other	1,360		1,156
Total other liabilities and deferred credits	9,995		10,817
Commitments and contingencies
Stockholder's equity:
Common stock at par, $0.01 par value; authorized 1,000 shares; issued and outstanding 1,000 shares at both September 30, 2021 and December 31, 2020	—		—
Additional capital invested	254		85
Retained earnings	3,622		4,939
Accumulated other comprehensive loss	(1,124)		(1,139)
Payable to parent	2,647		2,043
Total stockholder's equity	5,399		5,928
Total liabilities and stockholder's equity	$	69,266	$	59,520

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


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UNITED AIRLINES, INC.

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)

(In millions)


	Nine Months Ended September 30,
	2021		2020

Cash Flows from Operating Activities:
Net cash provided by (used in) operating activities	$	2,309	$	(1,968)

Cash Flows from Investing Activities:
Capital expenditures, net of flight equipment purchase deposit returns	(1,571)		(1,630)
Purchases of short-term and other investments	(47)		(552)
Proceeds from sale of short-term and other investments	271		2,182



Other, net	23		10
Net cash provided by (used in) investing activities	(1,324)		10

Cash Flows from Financing Activities:
Proceeds from issuance of debt, net of discounts and fees	11,098		12,730
Proceeds from issuance of parent company stock	532		1,135
Payments of long-term debt, finance leases and other financing liabilities	(4,632)		(1,017)
Dividend to UAL	—		(353)
Other, net	—		(1)
Net cash provided by financing activities	6,998		12,494
Net increase in cash, cash equivalents and restricted cash	7,983		10,536
Cash, cash equivalents and restricted cash at beginning of the period	11,742		2,862
Cash, cash equivalents and restricted cash at end of the period (a)	$	19,725	$	13,398

Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through the issuance of debt, finance leases and other	$	801	$	1,513
Lease modifications and lease conversions	111		503
Right-of-use assets acquired through operating leases	627		64
Notes receivable and warrants received for entering into aircraft and other ancillary business agreements	129		—

(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:


Current assets:
Cash and cash equivalents	$	19,256	$	13,150
Restricted cash — Current	254		76
Restricted cash — Non-Current	215		172
Total cash, cash equivalents and restricted cash	$	19,725	$	13,398

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


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UNITED AIRLINES, INC.

STATEMENTS OF CONSOLIDATED STOCKHOLDER'S EQUITY (UNAUDITED)

(In millions)


	Additional Capital Invested		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		(Receivable from) Payable to Related Parties, Net		Total

Balance at June 30, 2021	$	185	$	3,148	$	(1,114)	$	2,653	$	4,872
Net income	—		474		—		—		474
Other comprehensive loss	—		—		(10)		—		(10)
Stock-settled share-based compensation	69		—		—		—		69
Other	—		—		—		(6)		(6)
Balance at September 30, 2021	$	254	$	3,622	$	(1,124)	$	2,647	$	5,399

Balance at December 31, 2020	$	85	$	4,939	$	(1,139)	$	2,043	$	5,928
Net loss	—		(1,317)		—		—		(1,317)
Other comprehensive income	—		—		15		—		15
Stock-settled share-based compensation	169		—		—		—		169
Impact of UAL common stock issuance	—		—		—		532		532
Other	—		—		—		72		72
Balance at September 30, 2021	$	254	$	3,622	$	(1,124)	$	2,647	$	5,399

Balance at June 30, 2020	$	30	$	8,676	$	(1,259)	$	1,038	$	8,485
Net loss	—		(1,841)		—		—		(1,841)
Other comprehensive income	—		—		250		—		250
Stock-settled share-based compensation	38		—		—		—		38
Other	—		—		—		40		40
Balance at September 30, 2020	$	68	$	6,835	$	(1,009)	$	1,078	$	6,972

Balance at December 31, 2019	$	—	$	12,353	$	(718)	$	(143)	$	11,492
Net loss	—		(5,171)		—		—		(5,171)
Other comprehensive loss	—		—		(291)		—		(291)
Dividend to UAL	(12)		(330)		—		—		(342)
Stock-settled share-based compensation	80		—		—		—		80
Impact of UAL common stock issuance							1,135		1,135
Adoption of new accounting standard (a)	—		(17)		—		—		(17)
Other	—		—		—		86		86
Balance at September 30, 2020	$	68	$	6,835	$	(1,009)	$	1,078	$	6,972

(a) Transition adjustment due to the adoption of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses.

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


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UNITED AIRLINES HOLDINGS, INC. AND UNITED AIRLINES, INC.

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

United Airlines Holdings, Inc. (together with its consolidated subsidiaries, "UAL" or the "Company") is a holding company, and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, "United"). This Quarterly Report on Form 10-Q is a combined report of UAL and United, including their respective consolidated financial statements. As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United's operating revenues and operating expenses comprise nearly 100% of UAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL's assets, liabilities and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures, and any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words "we," "our," "us," and the "Company" in this report for disclosures that relate to all of UAL and United.

The UAL and United unaudited condensed consolidated financial statements shown here have been prepared as required by the U.S. Securities and Exchange Commission (the "SEC"). Some information and footnote disclosures normally included in financial statements that comply with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted as permitted by the SEC. The financial statements include all adjustments, including normal recurring adjustments and other adjustments, which are considered necessary for a fair presentation of the Company's financial position and results of operations for interim periods presented. The UAL and United financial statements should be read together with the information included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the "2020 Form 10-K"). The Company's quarterly financial data is subject to seasonal fluctuations. Historically its second and third quarter financial results have reflected higher travel demand, and were better than its first and fourth quarter financial results; however, see Part I, Item 2 of this report for additional discussion regarding trends associated with the matters discussed in the "Impact of the COVID-19 Pandemic" section below.

Impact of the COVID-19 Pandemic

The novel coronavirus (COVID-19) pandemic, together with the measures implemented or recommended by governmental authorities and private organizations in response to the pandemic, has had an adverse impact that has been material to the Company's business, operating results, financial condition and liquidity. The Company has seen increasing demand for travel both domestically and in countries where entry is permitted; however, as the situation surrounding the COVID-19 pandemic remains fluid, the pandemic has continued to negatively impact travel demand. It remains difficult to reasonably assess or predict the full extent of the ongoing impact of the COVID-19 pandemic on the Company's longer-term operational and financial performance, which will depend on a number of future developments, many of which are outside the Company's control, such as the ultimate duration of and factors impacting the recovery from the pandemic (including the efficacy and speed of vaccination programs in curbing the spread of the virus in different markets, the introduction and spread of new variants of the virus that may be resistant to currently approved vaccines and the continuation of existing or implementation of new government travel restrictions), the volatility of aircraft fuel prices, customer behavior changes and fluctuations in demand for air travel, among others. The Company's recovery from the COVID-19 pandemic has not followed a linear path, and due to the significant uncertainty that remains, its future operating performance, particularly in the short-term, may be subject to volatility. The Company is taking steps to be prepared for recovery as demand for travel continues to increase in line with recent customer booking trends, which include making certain investments in the recovery.

Capacity. The Company cut, relative to third quarter 2019 capacity, approximately 28% of its scheduled capacity for the third quarter of 2021 and expects its fourth quarter scheduled capacity to be down approximately 23% versus the fourth quarter of 2019. The Company will continue to monitor booking trends for future travel and adjust its capacity as needed.

Cost Reductions**.** The Company has identified various permanent structural cost reductions including improvements in labor efficiencies. During the first quarter of 2021, the Company offered voluntary leaves of absence to certain U.S.-based front-line employees. This program included (based on employee group, age and completed years of service) a partially-paid leave of absence with active health care coverage and travel privileges. Employees who separate from the Company after the end of such program receive certain separation benefits, such as post-employment health benefits and travel privileges. Approximately 4,500 employees elected to participate in this program, and it is expected that the majority of them will separate from employment at the end of their leave of absence. See Note 5 and Note 9 of this report for additional information on charges related to these programs.

Liquidity**.** The Company entered into a number of transactions to improve its liquidity and manage its capital. In the first nine months of 2021, the Company:

issued, through a private offering to eligible purchasers, $4.0 billion in aggregate principal amount of two series of notes, consisting of $2.0 billion in aggregate principal amount of 4.375% senior secured notes due 2026 (the "2026


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Notes") and $2.0 billion in aggregate principal amount of 4.625% senior secured notes due 2029 (the "2029 Notes" and, together with the 2026 Notes, the "Notes");

entered into a new Term Loan Credit and Guaranty Agreement (the "New Term Loan Facility") initially providing term loans (the "New Term Loans") up to an aggregate amount of $5.0 billion and a new Revolving Credit and Guaranty Agreement (the "New Revolving Credit Facility" and, together with the New Term Loan Facility, the "New Loan Facilities") initially providing revolving loan commitments of up to $1.75 billion;
repaid in full the $1.4 billion aggregate principal amount outstanding under the term loan facility (the "2017 Term Loan Facility") included in the Amended and Restated Credit and Guaranty Agreement, dated as of March 29, 2017 (the "Existing Credit Agreement");
repaid in full the $1.0 billion aggregate principal amount outstanding under the revolving credit facility (the "2017 Revolving Credit Facility") included in the Existing Credit Agreement;
repaid in full the $520 million aggregate principal amount outstanding under the Loan and Guarantee Agreement, dated as of September 28, 2020, among United, UAL, the U.S. Treasury Department ("Treasury") and the Bank of New York Mellon, as administrative agent, as amended (the "CARES Act Loan" and, together with the 2017 Term Loan Facility and the 2017 Revolving Credit Facility, the "Existing Loan Facilities"), which was entered into pursuant to the loan program established pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act");
entered into approximately $0.6 billion in new enhanced equipment trust certificates ("EETC"); and
raised approximately $0.5 billion in net cash proceeds from the issuance and sale of UAL common stock.

In addition to the foregoing transactions, United entered into the following agreements with Treasury:

PSP2. On January 15, 2021, United entered into a Payroll Support Program Extension Agreement (the "PSP2 Agreement") with Treasury providing the Company with total funding of approximately $3.0 billion, pursuant to the Payroll Support Program established under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021. These funds were used to pay for the wages, salaries and benefits of United employees, including the payment of lost wages, salaries and benefits to returning employees who were previously impacted by involuntary furloughs. Approximately $2.1 billion was provided as a direct grant and $870 million as indebtedness evidenced by a 10-year senior unsecured promissory note (the "PSP2 Note"). See Note 2 of this report for additional information on the warrants issued in connection with the PSP2 Note and Note 8 of this report for a discussion of the PSP2 Note.

PSP3. On April 29, 2021, in connection with the Payroll Support Program established under Section 7301 of the American Rescue Plan Act of 2021, United entered into a Payroll Support Program 3 Agreement (the "PSP3 Agreement") with Treasury providing the Company with total funding of approximately $2.8 billion. Approximately $2.0 billion was provided as a direct grant and $810 million as indebtedness evidenced by a 10-year senior unsecured promissory note (the "PSP3 Note"). These funds will be used by United exclusively for the continuation of payment of its employee wages, salaries and benefits. See Note 2 of this report for additional information on the warrants issued in connection with the PSP3 Note and Note 8 of this report for a discussion of the PSP3 Note.

NOTE 1 - REVENUE

Revenue by Geography. The table below presents the Company's operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Domestic (U.S. and Canada)	$	5,412	$	1,672	$	11,290	$	7,675
Atlantic	1,116		365		2,111		1,799
Pacific	373		282		1,073		1,346
Latin America	849		170		1,968		1,123
Total	$	7,750	$	2,489	$	16,442	$	11,943

Advance Ticket Sales. All tickets sold at any given point in time have travel dates through the next 12 months. The Company defers amounts related to future travel in its Advance ticket sales liability account. The Company's Advance ticket sales liability also includes credits issued to customers on electronic travel certificates ("ETCs") and future flight credits ("FFCs"), primarily for ticket cancellations, which can be applied towards a purchase of a new ticket. ETCs are valid up to two years from the date


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of issuance; however, all ETCs due to expire prior to December 31, 2022 have been extended until December 31, 2022. FFCs are valid for 12 months from the original ticket date; however, all FFCs issued on or before December 31, 2021 have been extended to be valid until December 31, 2022. As of September 30, 2021, the Company's Advance ticket sales liability included $3.0 billion related to these ETCs and FFCs. The Company is unable to estimate the amount of the ETCs and FFCs that will be used within the next 12 months and has classified the entire amount of the Advance ticket sales liability in current liabilities even though some of the ETCs and FFCs could be used after the next 12 months.

The Company estimates the value of tickets that will expire unused ("breakage") and recognizes revenue at the scheduled flight date. To determine breakage, the Company uses its historical experience with expired tickets and other facts, such as recent aging trends, program changes and modifications that could affect the ultimate expiration patterns of tickets. Given the uncertainty of travel demand caused by COVID-19, a significant portion of the ETCs and FFCs may expire unused in future periods and get recognized as breakage. The Company will update its breakage estimates as future information is received.

In the three and nine months ended September 30, 2021, the Company recognized approximately $2.8 billion and $1.6 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods. In the three and nine months ended September 30, 2020, the Company recognized approximately $0.5 billion and $2.9 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods.

Ancillary Fees. The Company charges fees, separately from ticket sales, for certain ancillary services that are directly related to passengers' travel, such as baggage fees, premium seats, inflight amenities and other ticket-related fees. These ancillary fees are part of the travel performance obligation and, as such, are recognized as passenger revenue when the travel occurs. The Company recorded $707 million and $1.5 billion of ancillary fees within passenger revenue in the three and nine months ended September 30, 2021, respectively. The Company recorded $205 million and $981 million of ancillary fees within passenger revenue in the three and nine months ended September 30, 2020, respectively.

Frequent Flyer Accounting. The table below presents a roll forward of Frequent flyer deferred revenue (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Total Frequent flyer deferred revenue - beginning balance	$	6,185	$	5,670	$	5,975	$	5,276
Total miles awarded	439		268		1,071		1,056
Travel miles redeemed (Passenger revenue)	(391)		(87)		(781)		(444)
Non-travel miles redeemed (Other operating revenue)	(16)		(16)		(48)		(53)
Total Frequent flyer deferred revenue - ending balance	$	6,217	$	5,835	$	6,217	$	5,835

In the three and nine months ended September 30, 2021, the Company recognized, in Other operating revenue, $484 million and $1.3 billion, respectively, related to the marketing, advertising, non-travel miles redeemed (net of related costs) and other travel-related benefits of the mileage revenue associated with our various partner agreements including, but not limited to, our JPMorgan Chase Bank, N.A. co-brand agreement. The Company recognized $378 million and $1.2 billion, respectively, in the three and nine months ended September 30, 2020, related to those agreements. The portion related to the MileagePlus miles awarded of the total amounts received from our various partner agreements is deferred and presented in the table above as an increase to the frequent flyer liability. We determine the current portion of our frequent flyer liability based on expected redemptions in the next 12 months (with the majority of these miles historically being redeemed within two years).


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NOTE 2 - EARNINGS (LOSS) PER SHARE

The computations of UAL's basic and diluted earnings (loss) per share are set forth below (in millions, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Earnings (loss) available to common stockholders	$	473	$	(1,841)	$	(1,318)	$	(5,172)

Basic weighted-average shares outstanding	323.7		291.0		321.3		273.5
Dilutive effect of employee stock awards	3.0		—		—		—
Dilutive effect of stock warrants	2.3		—		—		—
Diluted weighted-average shares outstanding	329.0		291.0		321.3		273.5

Earnings (loss) per share, basic	$	1.46	$	(6.33)	$	(4.10)	$	(18.91)
Earnings (loss) per share, diluted	$	1.44	$	(6.33)	$	(4.10)	$	(18.91)

During the first quarter of 2021, UAL entered into a warrant agreement with Treasury pursuant to which UAL issued to Treasury warrants to purchase up to approximately 2.0 million shares of UAL common stock (the "PSP2 Warrants"). The relative fair value of the PSP2 Warrants was calculated using a Black-Scholes options pricing model, and approximately $56 million was recorded within stockholders' equity with an offset to the CARES Act grant credit. During the second quarter of 2021, UAL entered into an additional warrant agreement with Treasury, pursuant to which UAL issued to Treasury warrants to purchase up to approximately 1.5 million shares of UAL common stock (the "PSP3 Warrants"). The relative fair value of the PSP3 Warrants was calculated using a Black-Scholes options pricing model, and approximately $43 million was recorded within stockholders' equity with an offset to the CARES Act grant credit. The PSP2 Warrants and PSP3 Warrants are exercisable either through net share settlement in cash or in shares of UAL common stock, at UAL's option. The PSP2 Warrants and PSP3 Warrants contain customary anti-dilution provisions and registration rights and are freely transferable. Pursuant to the terms of the PSP2 Warrants and PSP3 Warrants, warrant holders do not have any voting rights. As of September 30, 2021, the Company had the following warrants outstanding:


Warrant Description		Number of Shares of UAL Common Stock (in millions)	Exercise Price		Expiration Dates
PSP1 Warrants (a)		4.8	$	31.50	4/20/2025	—	9/30/2025
CARES Act Loan Warrants		1.7	31.50		9/28/2025
PSP2 Warrants		2.0	43.26		1/15/2026	—	4/29/2026
PSP3 Warrants		1.5	53.92		4/29/2026	—	6/10/2026
Total		10.0

(a)	Warrants issued in connection with the $1.5 billion 10-year senior unsecured promissory note with Treasury provided under the Payroll Support Program of the CARES Act ("PSP1").

On June 15, 2020, UAL entered into an equity distribution agreement relating to the issuance and sale from time to time by UAL (the "2020 ATM Offering"), of up to 28 million shares of UAL common stock. In the first quarter of 2021, the Company sold approximately 7 million shares at an average price of $42.98 per share, with net proceeds to the Company of approximately $282 million. With these sales, the Company sold all of the shares authorized under the 2020 ATM Offering.

On March 3, 2021, the Company entered into an equity distribution agreement (the "Distribution Agreement") with several financial institutions (collectively, the "Managers"), relating to the issuance and sale from time to time by UAL (the "2021 ATM Offering"), through the Managers, of up to 37 million shares of UAL common stock (the "2021 ATM Shares"). Sales of the 2021 ATM Shares under the Distribution Agreement may be made in any transactions that are deemed to be "at the market offerings" as defined in Rule 415 under the Securities Act of 1933, as amended. Under the terms of the Distribution Agreement, UAL may also sell the 2021 ATM Shares to any Manager, as principal for its own account, at a price agreed upon at the time of sale. If UAL sells the 2021 ATM Shares to a Manager as principal, UAL will enter into a separate terms agreement with such


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Manager. During the nine months ended September 30, 2021, approximately 4 million shares were sold in the 2021 ATM Offering at an average price of $57.50 per share, with net proceeds to the Company totaling approximately $250 million.

NOTE 3 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The tables below present the components of the Company's accumulated other comprehensive income (loss), net of tax ("AOCI") (in millions):


	Pension and Other Postretirement Liabilities			Investments and Other		Deferred Taxes		Total

Balance at June 30, 2021	$	(1,068)		$	1	$	(47)	$	(1,114)
Changes in value	(19)			(1)		4		(16)
Amounts reclassified to earnings	7		(a)	—		(1)		6
Balance at September 30, 2021	$	(1,080)		$	—	$	(44)	$	(1,124)

Balance at December 31, 2020	$	(1,102)		$	2	$	(39)	$	(1,139)
Changes in value	5			(2)		(1)		2
Amounts reclassified to earnings	17		(a)	—		(4)		13
Balance at September 30, 2021	$	(1,080)		$	—	$	(44)	$	(1,124)

Balance at June 30, 2020	$	(1,257)		$	3	$	(5)	$	(1,259)
Changes in value	(11)			—		2		(9)
Amounts reclassified to earnings	333		(a)	—		(74)		259
Balance at September 30, 2020	$	(935)		$	3	$	(77)	$	(1,009)

Balance at December 31, 2019	$	(560)		$	2	$	(160)	$	(718)
Changes in value	(781)			1		173		(607)
Amounts reclassified to earnings	406		(a)	—		(90)		316
Balance at September 30, 2020	$	(935)		$	3	$	(77)	$	(1,009)

(a) This AOCI component is included in the computation of net periodic pension and other postretirement costs (see Note 5 of this report for additional information).

NOTE 4 - INCOME TAXES

The Company's effective tax rates for the three and nine months ended September 30, 2021 were 21.6% and 23.0%, respectively. The effective tax rates for the three and nine months ended September 30, 2020 were 21.1% and 19.8%, respectively. The provision for income taxes is based on the estimated annual effective tax rate which represents a blend of federal, state and foreign taxes and includes the impact of certain nondeductible items. The effective tax rate was impacted by $52 million of additional valuation allowance related to unrealized capital losses for the three months ended September 30, 2021, and by $27 million of valuation allowance release related to unrealized capital gains and state attributes for the nine months ended September 30, 2021. The effective tax rates for the three and nine months ended September 30, 2020 were impacted by $27 million and $157 million, respectively, of changes in valuation allowance related to unrealized capital losses.


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NOTE 5 - EMPLOYEE BENEFIT PLANS

Defined Benefit Pension and Other Postretirement Benefit Plans. The Company's net periodic benefit cost includes the following components for the three months ended September 30 (in millions):


	Pension Benefits				Other Postretirement Benefits				Affected Line Item in the Statements of Consolidated Operations
	2021		2020		2021		2020
Service cost	$	59	$	58	$	2	$	3	Salaries and related costs
Interest cost	46		52		6		7		Miscellaneous, net
Expected return on plan assets	(70)		(77)		—		—		Miscellaneous, net
Amortization of unrecognized (gain) loss	42		48		(7)		(9)		Miscellaneous, net
Amortization of prior service credit	—		—		(30)		(31)		Miscellaneous, net
Special termination benefits	—		19		—		76		Miscellaneous, net
Settlement loss — Voluntary Programs (defined below)	—		319		—		—		Miscellaneous, net
Other	2		6		—		—		Miscellaneous, net
Total	$	79	$	425	$	(29)	$	46

The Company's net periodic benefit cost includes the following components for the nine months ended September 30 (in millions):


	Pension Benefits				Other Postretirement Benefits				Affected Line Item in the Statements of Consolidated Operations
	2021		2020		2021		2020
Service cost	$	179	$	165	$	7	$	8	Salaries and related costs
Interest cost	138		164		19		21		Miscellaneous, net
Expected return on plan assets	(212)		(259)		(1)		(1)		Miscellaneous, net
Amortization of unrecognized (gain) loss	127		120		(21)		(31)		Miscellaneous, net
Amortization of prior service credit	—		—		(92)		(93)		Miscellaneous, net
Special termination benefits	—		54		46		201		Miscellaneous, net
Settlement loss — Voluntary Programs (defined below)	—		390		—		—		Miscellaneous, net
Other	3		20		—		—		Miscellaneous, net
Total	$	235	$	654	$	(42)	$	105

The Company does not have any minimum required contributions for 2021; however, during the third quarter of 2021, the Company made a voluntary contribution of $375 million to its U.S. domestic tax-qualified defined benefit pension plan covering certain U.S. non-pilot employees.

In 2020 and 2021, the Company offered several voluntary leave programs and voluntary separation programs ("Voluntary Programs") to certain eligible employees, which in some cases included a partially-paid leave of absence with active health benefits and travel privileges. Under these Voluntary Programs, employees generally separated (or will separate) from employment with certain post-employment health benefits and travel privileges.

Included in the Voluntary Programs offered during the first quarter of 2021, the Company offered special separation benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees. The subsidies are in the form of a one-time contribution to a notional Retiree Health Account of $125,000 for full-time employees and $75,000 for part-time employees. As a result, the Company recorded $46 million for those additional benefits in the three months ended March 31, 2021.

During the second and third quarters of 2020, the Company offered certain of its eligible front-line employees special separation benefits in the form of additional years of pension service and additional subsidies for retiree medical costs (based on employee group, age and completed years of service) as a part of the Voluntary Programs. As a result, the Company recorded, in the three and nine months ended September 30, 2020, $19 million and $54 million, respectively, for those additional pension benefits. In the three and nine months ended September 30, 2020, the Company recorded $76 million and $201 million,


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respectively, for those additional retiree medical benefits. Also, the Company recognized, in the three and nine months ended September 30, 2020, $319 million and $390 million, respectively, in settlement losses related to the defined benefit pension plan covering certain U.S. non-pilot employees.

Share-Based Compensation. During the nine months ended September 30, 2021, UAL's Board of Directors and stockholders approved the United Airlines Holdings, Inc. 2021 Incentive Compensation Plan (the "2021 Plan"). The 2021 Plan is an incentive compensation plan that allows the Company to use different forms of equity incentives to attract, retain and reward officers and employees. Under the 2021 Plan, the Company may grant: nonqualified stock options; incentive stock options (within the meaning of Section 422 of the Internal Revenue Code of 1986); stock appreciation rights ("SARs"); restricted shares; restricted stock units ("RSUs"); performance units; cash incentive awards and other equity-based and equity-related awards. An award (other than an option, SAR or cash incentive award) may provide the holder with dividends or dividend equivalents. The 2021 Plan replaces the United Continental Holdings, Inc. 2017 Incentive Compensation Plan (the "2017 Plan"). Any awards granted under the 2017 Plan prior to the approval of the 2021 Plan remain in effect pursuant to their terms.

During the nine months ended September 30, 2021, UAL granted share-based compensation awards pursuant to both the 2017 Plan and the 2021 Plan. These share-based compensation awards included 2.9 million RSUs, consisting of 1.3 million time-vested RSUs and 1.6 million short-term performance-based RSUs. A majority of the time-vested RSUs vest equally in 25% increments every 6 months over a two-year period from the date of grant. The short-term performance-based RSUs vest upon the achievement of established goals based on financial and customer satisfaction metrics for the performance period January 1, 2021 to December 31, 2021. RSUs are generally equity awards settled in stock for domestic employees and liability awards settled in cash for international employees. The cash payments are based on the 20-day average closing price of UAL common stock immediately prior to the vesting date.

The table below presents information related to share-based compensation (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Share-based compensation expense	$	71	$	41	$	174	$	83

	September 30, 2021		December 31, 2020
Unrecognized share-based compensation	$	128	$	88

NOTE 6 - FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The table below presents disclosures about the financial assets and liabilities measured at fair value on a recurring basis in UAL's financial statements (in millions):


	September 30, 2021								December 31, 2020
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	19,256	$	19,256	$	—	$	—	$	11,269	$	11,269	$	—	$	—
Restricted cash - current	254		254		—		—		255		255		—		—
Restricted cash - non-current	215		215		—		—		218		218		—		—
Short-term investments:
Corporate debt	130		—		130		—		330		—		330		—
Asset-backed securities	34		—		34		—		51		—		51		—
U.S. government and agency notes	2		—		2		—		33		—		33		—
Long-term investments:
Equity securities	420		420		—		—		241		205		—		36

Investments presented in the table above have the same fair value as their carrying value.

Restricted cash - current — Primarily includes $217 million of cash collateral for a standby letter of credit associated with guarantees related to the BRW Term Loan (as defined below). See Note 7 of this report for additional information on the BRW Term Loan and guarantees. The balance also includes amounts to be used for the payment of fees, principal and interest on senior secured notes and a secured term loan facility (the "MileagePlus Financing") secured by substantially all of the assets of Mileage Plus Holdings, LLC, a direct wholly-owned subsidiary of United.


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Restricted cash - non-current — Primarily includes collateral associated with the MileagePlus Financing, collateral for letters of credit and collateral associated with facility leases and other insurance-related obligations.

Short-term investments — The short-term investments shown in the table above are classified as available-for-sale. As of September 30, 2021, corporate debt securities have remaining maturities of less than two years, asset-backed securities have remaining maturities of less than one year to approximately eight years and U.S. government and agency notes have maturities of less than one year.

Equity securities — Represents equity and equity-linked securities (such as vested warrants) that make up United's investments in Azul Linhas Aéreas Brasileiras S.A., Clear Secure, Inc. (formerly, Alclear, Inc.) and Archer Aviation Inc. ("Archer"). The Company received equity securities in exchange for assisting Archer in the development of battery-powered, short haul aircraft. The Company will account for equity securities it receives from Archer as a deferred credit that will either be recognized into income upon United satisfying certain performance obligations or as a reduction to the cost of the aircraft received in future periods.

Other fair value information. The table below presents the carrying values and estimated fair values of financial instruments not presented in the tables above (in millions). Carrying amounts include any related discounts, premiums and issuance costs:


	September 30, 2021										December 31, 2020
	Carrying Amount		Fair Value								Carrying Amount		Fair Value
			Total		Level 1		Level 2		Level 3				Total		Level 1		Level 2		Level 3
Long-term debt	$	33,789	$	35,324	$	—	$	29,779	$	5,545	$	26,747	$	27,441	$	—	$	21,985	$	5,456

Fair value of the financial instruments included in the tables above was determined as follows:


Description			Fair Value Methodology
Cash and cash equivalents and Restricted cash (current and non-current)			The carrying amounts of these assets approximate fair value.
Short-term investments and Equity securities			Fair value is based on (a) the trading prices of the investment or similar instruments, (b) an income approach, which uses valuation techniques to convert future amounts into a single present amount based on current market expectations about those future amounts when observable trading prices are not available, or (c) broker quotes obtained by third-party valuation services.
Long-term debt			Fair values were based on either market prices or the discounted amount of future cash flows using our current incremental rate of borrowing for similar liabilities or assets.

Notes Receivable. The Company has a debtor-in-possession ("DIP") term loan ("DIP Loan") receivable under the terms of the DIP credit agreement filed, on May 10, 2020, by Avianca Holdings S.A. ("AVH") and certain of its affiliates as part of the voluntary reorganization proceedings under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. The DIP Loan is not convertible. It bears paid-in-kind interest at a rate of 14.5% per annum and has a scheduled maturity date in November 2021. The DIP Loan becomes immediately payable upon AVH's emergence from bankruptcy, in either cash or shares of AVH stock, at AVH's election. AVH has filed a plan of reorganization in the U.S. Bankruptcy Court for the Southern District of New York, pursuant to which it plans to repay the Company’s DIP Loan in shares of stock of the reorganized AVH upon AVH's emergence from bankruptcy. As of September 30, 2021, the DIP Loan had a balance of $176 million and was recorded in Receivables on the Company's consolidated balance sheet. The Company also received a $120 million note receivable (the "Boom Note") from Boom Technology, Inc. ("Boom") related to a commercial agreement to add supersonic aircraft to its global fleet as well as a cooperative sustainability initiative. As of September 30, 2021, the Boom Note had a carrying value of $44 million and was recorded in Investments in affiliates and other, less allowance for credit losses on the Company's consolidated balance sheet. The initial value of the Boom Note was recorded as a deferred credit that will either be recognized into income upon United satisfying certain performance obligations or as a reduction to the cost of the aircraft received in future periods.

Investments in Regional Carriers. United holds investments in several regional carriers that fly or used to fly for the Company as United Express under its capacity purchase agreements ("CPAs"). The combined carrying value of the investments was approximately $160 million as of September 30, 2021. United accounts for each investment using the equity method. Each investment and United's ownership stake are listed below.

Champlain Enterprises, LLC ("Champlain"). United owns a 40% minority ownership stake in Champlain. Champlain does business as CommutAir. CommutAir currently operates 78 regional aircraft under a CPA that has a term through 2026.


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Republic Airways Holdings Inc. ("Republic Holdings"). United holds a 19% minority interest in Republic Holdings. Republic Holdings is the parent company of Republic Airways Inc. ("Republic"). Republic currently operates 66 regional aircraft under CPAs that have terms through 2036.
ManaAir, LLC ("ManaAir"). United holds a 49.9% minority ownership stake in ManaAir. ManaAir is the parent company of ExpressJet Airlines LLC ("ExpressJet"). The Company terminated its CPA with ExpressJet. ExpressJet flew its last commercial flight, on behalf of United, on September 30, 2020.

Other Investments. United holds other equity investments in emerging companies with new aircraft technologies or sustainable aviation fuel solutions, such as Fulcrum BioEnergy, Inc., Boom, Alder Fuels LLC and Heart Aerospace Incorporated, which do not have readily determinable fair values. We account for these investments using a measurement alternative that allows entities to measure these investments at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. As of September 30, 2021, the carrying value of these investments was $79 million.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Commitments. As of September 30, 2021, United had firm commitments and options to purchase aircraft from The Boeing Company ("Boeing") and Airbus S.A.S. ("Airbus") as presented in the table below:


		Scheduled Aircraft Deliveries
Aircraft Type	Number of Firm Commitments (a)	Last Three Months of 2021	2022	2023	After 2023
Airbus A321XLR	50	—	—	—	50
Airbus A321neo	70	—	—	16	54
Airbus A350	45	—	—	—	45
Boeing 737 MAX	371	4	48	114	205
Boeing 787	8	1	7	—	—
(a) United also has options and purchase rights for additional aircraft.

During the third quarter of 2021, the Company elected to accelerate the delivery of eight Boeing 737 MAX aircraft from 2023 to 2022. The aircraft listed in the table above are scheduled for delivery through 2030. To the extent the Company and the aircraft manufacturers with whom the Company has existing orders for new aircraft agree to modify the contracts governing those orders, or to the extent rights are exercised pursuant to the relevant agreements to modify the timing of deliveries, the amount and timing of the Company's future capital commitments could change.

United has an agreement to purchase ten used Airbus A319 aircraft, which it intends to sell, with expected delivery dates in 2021 and 2022.

In 2020, United entered into agreements with third parties to finance through sale and leaseback transactions new Boeing model 787 aircraft and Boeing model 737 MAX aircraft subject to purchase agreements between United and Boeing. In connection with the delivery of each aircraft from Boeing, United assigned its right to purchase such aircraft to the buyer, and simultaneous with the buyer's purchase from Boeing, United entered into a long-term lease for such aircraft with the buyer as lessor. Twenty Boeing model aircraft were delivered in the first nine months of 2021 under these transactions (and each is presently subject to a long-term lease to United). Remaining aircraft in the agreements are scheduled to be delivered in the last three months of 2021. Upon delivery of aircraft in these sale and leaseback transactions in 2021, the Company accounted for seven of these aircraft, which have a repurchase option at a price other than fair value, as part of Flight equipment on the Company's consolidated balance sheet and the related obligation recorded in Other current liabilities and Other financial liabilities from sale-leasebacks (noncurrent) since they do not qualify for sale recognition. The remaining thirteen aircraft that qualified for sale recognition were recorded as Operating lease right-of-use assets and Current/Long-term obligations under operating leases on the Company's consolidated balance sheet after recognition of related gains on such sale.

The table below summarizes United's commitments as of September 30, 2021, which include aircraft and related spare engines, aircraft improvements and all non-aircraft capital commitments (in billions):


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Last three months of 2021	$	0.9
2022	5.3
2023	7.0
2024	4.8
2025	4.3
After 2025	12.2
	$	34.5

Regional CPAs. In September 2021, United entered into a new CPA with Republic for Republic to operate 38 Embraer E175LL aircraft on United's behalf starting in 2022 for a 12-year term. The new Embraer E175LL aircraft will replace the Embraer E170 aircraft currently being flown by Republic for United. The table below summarizes the Company's expected future payments through the end of the terms of our CPAs, excluding aircraft ownership costs and variable pass-through costs such as fuel and landing fees, among others. Our future commitments under our CPAs are dependent on numerous variables, and are, therefore, difficult to predict. We have set forth below estimates based on our current assumptions of our anticipated level of flight activity or any contractual minimum utilization levels if applicable, whichever is higher. Based on these assumptions as of September 30, 2021, our estimated future payments through the end of the terms of our CPAs are presented in the table below (in billions):


Last three months of 2021	$	0.6
2022	2.1
2023	2.0
2024	1.9
2025	1.6
After 2025	5.5
	$	13.7

Guarantees. As of September 30, 2021, United is the guarantor of approximately $2.1 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon. These bonds, issued by various airport municipalities, are payable solely from rentals paid under long-term agreements with the respective governing bodies. The leasing arrangements associated with these obligations are accounted for as operating leases recognized on the Company's consolidated balance sheet with the associated expense recorded on a straight-line basis over the expected lease term. All of these bonds are due between 2023 and 2041.

In August 2021, at the request of United, the City of Houston, Texas issued its approximately $289 million special facilities revenue bonds for the purpose of (a) financing the costs of construction of a multi-terminal baggage handling system, tenant improvements, fixtures, equipment, personnel areas, and related facilities, and an early baggage system building (together with a related fire pump room) at George Bush Intercontinental Airport (IAH), all to be installed by and for use by United and (b) paying related costs of issuance. The bonds bear interest at 4.0% per annum, payable semiannually, commencing January 2022 through the July 2041 maturity date. United is accounting for the payments for these special facilities revenue bonds as lease payments under an operating lease recognized as a right-of-use asset and lease liability on the Company's balance sheet.

In November 2018, United, as lender, entered into a Term Loan Agreement (the "BRW Term Loan Agreement") with, among others, BRW Aviation Holding LLC and BRW Aviation LLC ("BRW"), as guarantor and borrower, respectively. BRW Aviation Holding LLC and BRW are affiliates of Synergy Aerospace Corporation, and BRW is the majority shareholder of AVH. Pursuant to the BRW Term Loan Agreement, United provided to BRW a $456 million term loan (the "BRW Term Loan"). In November 2018, in connection with funding the BRW Term Loan Agreement, the Company entered into an agreement with Kingsland Holdings Limited ("Kingsland"), AVH's largest minority shareholder, pursuant to which, in return for Kingsland's pledge of its 144.8 million common shares of AVH (which are eligible to be converted into the same number of preferred shares, which may be deposited with the depositary for AVH's American Depositary Receipts ("ADRs"), the class of AVH securities that trades on the NYSE, in exchange for 18.1 million ADRs) and its consent to BRW's pledge of its AVH common shares to United under the BRW Term Loan Agreement and related agreements, United (1) granted to Kingsland the right to put its AVH common shares to United at market price on the fifth anniversary of the BRW Term Loan Agreement or upon certain sales of AVH common shares owned by BRW, including upon a foreclosure of United's security interest, and (2) guaranteed BRW's obligation to pay Kingsland the difference if the market price of AVH common shares on the fifth anniversary, or upon any such sale, as applicable, is less than $12 per ADR on the NYSE, for an aggregate maximum possible combined put payment and guarantee amount on the fifth anniversary of $217 million. Due to AVH's financial uncertainty and


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subsequent bankruptcy filing in 2019, the Company recorded the full amount of the guarantee as a liability, and pursuant to the plan of reorganization that AVH has filed in the U.S. Bankruptcy Court for the Southern District of New York, existing common shares of AVH would be cancelled and extinguished and holders would not be entitled to any recovery upon AVH’s exit from bankruptcy, planned to occur in the fourth quarter of 2021, and accordingly the expected value is zero per ADR. Additionally, the Company posted $217 million as cash collateral for a standby letter of credit in favor of Citibank, N.A. that serves as security for a loan from Citibank to Kingsland (recorded in Restricted cash – current on the Company's consolidated balance sheet). Any drawings under the letter of credit would offset the Company's maximum possible put and guarantee payment to Kingsland by an equal amount. The posting of this collateral, and any potential credit against the Company's put and guarantee payment, are entirely related to the original transactions entered in 2018 and do not represent any new or incremental investment.

As of September 30, 2021, United is the guarantor of $109 million of aircraft mortgage debt issued by one of United's regional carriers. The aircraft mortgage debt is subject to similar increased cost provisions as described below for the Company's debt, and the Company would potentially be responsible for those costs under the guarantees.

Increased Cost Provisions. In United's financing transactions that include loans in which United is the borrower, United typically agrees to reimburse lenders for any reduced returns with respect to the loans due to any change in capital requirements and, in the case of loans with respect to which the interest rate is based on the London Interbank Offered Rate (LIBOR), for certain other increased costs that the lenders incur in carrying these loans as a result of any change in law, subject, in most cases, to obligations of the lenders to take certain limited steps to mitigate the requirement for, or the amount of, such increased costs. At September 30, 2021, the Company had $13.3 billion of floating rate debt with remaining terms of up to approximately 11 years that are subject to these increased cost provisions. In several financing transactions involving loans or leases from non-U.S. entities, with remaining terms of up to approximately 11 years and an aggregate balance of $10.1 billion, the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder to non-U.S. entities to withholding taxes, subject to customary exclusions.

Labor Negotiations. As of September 30, 2021, the Company had approximately 85,300 employees, of whom approximately 85% were represented by various U.S. labor organizations. This total includes employees who elected to voluntarily separate from the Company pursuant to Company-offered Voluntary Programs but who still remained on pay and benefit continuation. During the third quarter of 2021, the Company announced its decision to transition, in October 2021, its catering operations to a combination of three outside suppliers who will operate five kitchens and oversee the functions related to menu design and administration. Impacted employees who were in good standing have been offered jobs at one of the three suppliers, and about 70% will continue to have union representation following the transition.

Credit Card Processing Agreements. The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of the Company's credit card processing agreements, the financial institutions in certain circumstances have the right to require that the Company maintain a reserve equal to a portion of advance ticket sales that has been processed by that financial institution, but for which the Company has not yet provided the air transportation. Such financial institutions may require cash or other collateral reserves to be established or withholding of payments related to receivables to be collected, including if the Company does not maintain certain minimum levels of unrestricted cash, cash equivalents and short-term investments.

NOTE 8 - DEBT

On April 21, 2021, United paid all amounts outstanding under the 2017 Revolving Credit Facility and the 2017 Term Loan Facility, terminated the 2017 Revolving Credit Facility and the 2017 Term Loan Facility and entered into the New Loan Facilities described below. As of September 30, 2021, United had $1.75 billion available for borrowing under the New Revolving Credit Facility at any time until April 21, 2025. No borrowings were outstanding under the New Revolving Credit Facility at September 30, 2021.

EETCs**.** In February 2021, United created EETC pass-through trusts which issued pass-through certificates. The proceeds from the issuance of the pass-through certificates are used to purchase equipment notes issued by United and secured by its aircraft financed with the proceeds of such notes. The Company records the debt obligation upon issuance of the equipment notes rather than upon the initial issuance of the pass-through certificates. The pass-through certificates represent fractional undivided interests in the respective pass-through trusts and are not obligations of United. The payment obligations under the equipment notes are those of United. Proceeds received from the sale of pass-through certificates are initially held by a depositary in escrow for the benefit of the certificate holders until United issues equipment notes to the trust, which purchases such notes with a portion of the escrowed funds. These escrowed funds are not guaranteed by United and are not reported as debt on our consolidated balance sheet because the proceeds held by the depositary are not United's assets. Certain details of the pass-through trusts with proceeds received from issuance of debt in 2021 are as follows (in millions, except stated interest rate):


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EETC Issuance Date						Class						Face Amount												Stated interest rate						Total proceeds received from issuance of debt and recorded as debt as of September 30, 2021
February 2021						B						$	600											4.88%						$	600

PSP2 Note. During the nine months ended September 30, 2021, UAL issued an $870 million PSP2 Note to Treasury evidencing senior unsecured indebtedness of UAL. The PSP2 Note is guaranteed by United and will mature ten years after issuance on January 15, 2031 (the "PSP2 Note Maturity Date"). If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness of UAL with a principal balance in excess of a specified amount, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP2 Note. UAL may, at its option, prepay the PSP2 Note, at any time, and from time to time, at par. UAL is required to prepay the PSP2 Note upon the occurrence of certain change of control triggering events. The PSP2 Note does not require any amortization and is to be repaid in full on the PSP2 Note Maturity Date. Interest on the PSP2 Note is payable semi-annually in arrears on the last business day of March and September of each year, beginning on March 31, 2021, at a rate of 1.00% in years 1 through 5, and at the Secured Overnight Financing Rate (SOFR) plus 2.00% in years 6 through 10.

PSP3 Note. During the nine months ended September 30, 2021, UAL issued an $810 million PSP3 Note to Treasury evidencing senior unsecured indebtedness of UAL. The PSP3 Note is guaranteed by United and will mature ten years after issuance on April 29, 2031 (the "PSP3 Note Maturity Date"). If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness of UAL with a principal balance in excess of a specified amount, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP3 Note. UAL may, at its option, prepay the PSP3 Note, at any time, and from time to time, at par. UAL is required to prepay the PSP3 Note upon the occurrence of certain change of control triggering events. The PSP3 Note does not require any amortization and is to be repaid in full on the PSP3 Note Maturity Date. Interest on the PSP3 Note is payable semi-annually in arrears on the last business day of March and September of each year, beginning on September 30, 2021, at a rate of 1.00% in years 1 through 5, and at the Secured Overnight Financing Rate (SOFR) plus 2.00% in years 6 through 10.

Notes. On April 21, 2021, United issued, through a private offering to eligible purchasers, $4.0 billion in aggregate principal amount of two series of Notes, consisting of $2.0 billion in aggregate principal amount of the 2026 Notes and $2.0 billion in aggregate principal amount of the 2029 Notes. The 2026 Notes, issued at a price of 100% of their principal amount, bear interest at a rate of 4.375% per annum and will mature on April 15, 2026. The 2029 Notes, issued at a price of 100% of their principal amount, bear interest at a rate of 4.625% per annum and will mature on April 15, 2029. The Notes are guaranteed on an unsecured basis by UAL.

New Loan Facilities. Concurrently with the closing of the offering of the Notes, United also entered into the New Loan Facilities, consisting of the New Term Loan Facility initially providing New Term Loans up to an aggregate amount of $5.0 billion and the New Revolving Credit Facility initially providing revolving loan commitments of up to $1.75 billion. United borrowed the full amount of the New Term Loans on April 21, 2021, which bear interest at a variable rate equal to LIBOR (but not less than 0.75% per annum) plus a margin of 3.75% per annum. The principal amount of the New Term Loan Facility must be repaid in consecutive quarterly installments of 0.25% of the original principal amount thereof with the balance due at maturity. Borrowings under the New Revolving Credit Facility bear interest at a variable rate equal to LIBOR plus a margin of 3.00% to 3.50% per annum. United pays a commitment fee equal to 0.75% per annum on the undrawn amount available under the New Revolving Credit Facility.

United used the net proceeds from the offering of the Notes and borrowings under the New Term Loan Facility (i) to repay in full all of the Existing Loan Facilities, including the $1.4 billion aggregate principal amount outstanding under the 2017 Term Loan Facility, the $1.0 billion aggregate principal amount outstanding under the 2017 Revolving Credit Facility and the $520 million aggregate principal amount outstanding under the CARES Act Loan, (ii) to pay fees and expenses relating to the offering of the Notes and (iii) for United's general corporate purposes. As a result of such repayments, the Existing Loan Facilities were terminated on April 21, 2021, and no further borrowings may be made thereunder.

The Notes and the New Loan Facilities are secured on a senior basis by security interests granted by United to the collateral trustee for the benefit of the holders of the Notes and the lenders under the New Loan Facilities, among other parties, on the following: (i) all of United's route authorities granted by the U.S. Department of Transportation to operate scheduled service between any international airport located in the United States and any international airport located in any country other than the United States (except Cuba), (ii) United's rights to substantially all of its landing and take-off slots at foreign and domestic airports, including at John F. Kennedy International Airport, LaGuardia Airport and Ronald Reagan Washington National Airport (subject to certain exclusions), and (iii) United's rights to use or occupy space at airport terminals, each to the extent necessary at the relevant time for servicing scheduled air carrier service authorized by an applicable route authority.


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Our debt agreements contain customary terms and conditions as well as various affirmative, negative and financial covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness and pay dividends or repurchase stock. As of September 30, 2021, UAL and United were in compliance with their respective debt covenants.

The table below presents the Company's contractual principal payments (not including $558 million of unamortized debt discount, premiums and debt issuance costs) at September 30, 2021 under then-outstanding long-term debt agreements (in millions):


Last three months of 2021	$	519
2022	2,967
2023	2,852
2024	3,908
2025	3,378
After 2025	20,723
	$	34,347

NOTE 9 - SPECIAL CHARGES (CREDITS)

For the three and nine months ended September 30, special charges (credits), unrealized (gains) losses on investments, debt extinguishment and modification fees, special termination benefits and settlement losses and certain credit losses in the statements of consolidated operations consisted of the following (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
CARES Act grant	$	(1,132)	$	(1,494)	$	(4,021)	$	(3,083)
Impairment of assets	46		38		105		168
Severance and benefit costs	5		350		433		413
(Gains) losses on sale of assets and other special charges	(17)		25		60		35
Total operating special charges (credits)	(1,098)		(1,081)		(3,423)		(2,467)
Nonoperating unrealized (gains) losses on investments, net	34		(15)		(91)		295
Nonoperating debt extinguishment and modification fees	(12)		—		50		—
Nonoperating special termination benefits and settlement losses	—		415		46		646
Nonoperating credit loss on BRW Term Loan and related guarantee	—		—		—		697
Total nonoperating special charges and unrealized (gains) losses on investments, net	22		400		5		1,638
Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net	(1,076)		(681)		(3,418)		(829)
Income tax expense, net of valuation allowance	274		148		768		375
Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net of income taxes	$	(802)	$	(533)	$	(2,650)	$	(454)

2021

CARES Act grant. During the nine months ended September 30, 2021, the Company received approximately $5.8 billion in funding pursuant to the PSP2 Agreement and the PSP3 Agreement, which included an approximately $1.7 billion unsecured loan. The Company recorded $1.1 billion and $4.0 billion as grant income in Special charges (credits) during the three and nine months ended September 30, 2021, respectively. The Company also recorded $99 million for the PSP2 Warrants and PSP3 Warrants issued to Treasury as part of the PSP2 Agreement and PSP3 Agreement, within stockholders' equity, as an offset to the grant income in the nine months ended September 30, 2021.

Impairment of assets. During the three months ended September 30, 2021, the Company recorded $46 million of impairment charges for nine Airbus A319 aircraft and 13 Boeing 737-700 airframes as a result of current market conditions for used aircraft. These aircraft are all considered held for sale and classified as part of other assets. During the nine months ended September 30, 2021, in addition to the third quarter impairments described above, the Company recorded $59 million of


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impairments primarily related to 64 Embraer EMB 145LR aircraft and related spare engines that United retired from its regional fleet. The decision to retire these aircraft was triggered by the United Next aircraft order. In February 2021, the Company voluntarily and temporarily removed all 52 Boeing 777-200/200ER aircraft powered by Pratt & Whitney 4000 series engines from its schedule due to an engine failure incident with one of its aircraft. The Company viewed this incident as an indicator of potential impairment. Accordingly, as required under relevant accounting standards, United performed forecasted cash flow analyses and determined that the carrying value of the Boeing 777-200/200ER fleet is expected to be recoverable from future cash flows expected to be generated by that fleet and, consequently, no impairment was recorded.

Severance and benefit costs. During the three and nine months ended September 30, 2021, the Company recorded charges of $5 million and $433 million, respectively, related to pay continuation and benefits-related costs provided to employees who chose to voluntarily separate from the Company. The Company offered, based on employee group, age and completed years of service, pay continuation, health care coverage, and travel benefits. Approximately 4,500 employees elected to voluntarily separate from the Company.

(Gains) losses on sale of assets and other special charges. During the three months ended September 30, 2021, the Company recorded net gains of $17 million primarily related to gains on aircraft sale-leaseback transactions and aircraft component manufacturer credits. During the nine months ended September 30, 2021, the Company recorded net charges of $60 million primarily related to incentives for its employees to receive a COVID-19 vaccination and the termination of the lease associated with three floors of its headquarters at the Willis Tower in Chicago partially offset by the third quarter's gains.

Nonoperating unrealized (gains) losses on investments, net. During the three and nine months ended September 30, 2021, the Company recorded losses of $34 million and gains of $91 million, respectively, primarily for the change in the market value of its investments in equity securities. Substantially all of the gains and losses were related to equity securities held by the Company as of September 30, 2021. See Note 6 of this report for information related to these equity investments.

Nonoperating debt extinguishment and modification fees. During the nine months ended September 30, 2021, the Company recorded $50 million of charges for fees and discounts related to the issuance of the New Loan Facilities and the prepayment of the Existing Loan Facilities.

Nonoperating special termination benefits and settlement losses. During the nine months ended September 30, 2021, as part of the first quarter Voluntary Programs, the Company recorded $46 million of special termination benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees. The subsidies were in the form of a one-time contribution to a notional Retiree Health Account of $125,000 for full-time employees and $75,000 for part-time employees.

2020

CARES Act grant. During the nine months ended September 30, 2020, the Company received approximately $5.1 billion in funding pursuant to PSP1, which consisted of a $3.6 billion grant and a $1.5 billion unsecured loan. The Company recognized $3.1 billion of the grant as a credit to Special charges (credits) and $66 million in warrants issued to Treasury, within stockholders' equity, as an offset to the grant income.

Impairment of assets. During the three and nine months ended September 30, 2020, the Company recorded an impairment charge of $38 million related to the right-of-use asset associated with the embedded aircraft lease in one of our CPAs. Also, during the nine months ended September 30, 2020, the Company recorded impairment charges of $130 million for its China routes, which were primarily caused by the COVID-19 pandemic, the Company's subsequent suspension of flights to China and a further delay in the expected return of full capacity to the China markets.

Severance and benefit costs. During the three and nine months ended September 30, 2020, the Company recorded $350 million and $413 million, respectively, related to the workforce reduction and voluntary plans for employee severance, pay continuance from voluntary retirements and benefits-related costs.

Nonoperating unrealized gains (losses) on investments, net. During the three and nine months ended September 30, 2020, the Company recorded gains of $15 million and losses of $271 million, respectively, primarily for the change in the market value of its investment in equity securities. Also, during the nine months ended September 30, 2020, the Company recorded losses of $24 million for the decrease in fair value of the AVH share call options, AVH share appreciation rights and AVH share-based upside sharing agreement.

Nonoperating special termination benefits and settlement losses. During the three and nine months ended September 30, 2020, the Company recorded $415 million and $646 million, respectively, of settlement losses related to the Company's primary defined benefit pension plan covering certain U.S. non-pilot employees, and special termination benefits offered under


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Voluntary Programs to certain front-line U.S.-based employees participating in the non-pilot defined benefit pension plan and postretirement medical programs.

Nonoperating credit loss on BRW Term Loan and related guarantee. During the nine months ended September 30, 2020, the Company recorded a $697 million expected credit loss allowance for the BRW Term Loan and related guarantee. AVH is currently in bankruptcy. See Notes 6 and 7 of this report for additional information.


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