Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Management's Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q to enhance the understanding of our results of operations, financial condition and cash flows.

EXECUTIVE SUMMARY

Overview

United Airlines Holdings, Inc. (together with its consolidated subsidiaries, "UAL" or the "Company") is a holding company and its 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.

Our shared purpose is "Connecting People. Uniting the World." We have the most comprehensive route network among North American carriers, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C. The Company transports people and cargo through its mainline operations, which utilize jet aircraft with at least 126 seats, and regional operations, which utilize smaller aircraft that are operated under contract by United Express carriers. The Company serves virtually every major market around the world, either directly or through participation in Star Alliance®, the world's largest airline alliance.

Our current expectations described below are forward-looking statements and our actual results and timing may vary materially based on various factors that include, but are not limited to, those discussed below under "Economic and Market Factors" and "Forward-Looking Information" and in Part I, Item 1A. Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the "2022 Form 10-K"). The Company discusses certain non-GAAP forward-looking projections and is unable to predict certain items contained in the corresponding GAAP measures without unreasonable efforts; refer to "Supplemental Information" below for further details. The results presented in this report are not necessarily indicative of future operating results.

Economic and Market Factors

The airline industry is highly competitive, marked by significant competition with respect to routes, fares, schedules (both timing and frequency), services, products, customer service and frequent flyer programs. We, like other companies in our industry, have been subject to these and other industry-specific competitive dynamics. In addition, our operations, supply chain, partners and suppliers have been subject to various global macroeconomic factors. We expect to continue to remain vulnerable to a number of industry-specific and global macroeconomic factors that may cause our actual results of operations to differ from our historical results of operations or current expectations. The factors and trends that we currently believe are or will be most impactful to our results of operations and financial condition include the following: the execution risks associated with our United Next plan; the impact on the Company of significant operational challenges by third parties on which we rely; rising inflationary pressures; labor market and supply chain constraints and related costs affecting us and our partners; volatile fuel prices; aircraft delivery delays; the lasting effects of the COVID-19 global pandemic and related governmental regulations and restrictions, which we believe have changed how our customers fly in ways that we expect to be both positive and negative for the Company, including the lingering impact of the pandemic on the return of business and international travel demand—especially in our China market—to pre-COVID-19 levels; the closure of our flying airspace and termination of other operations due to regional conflicts, including the continuation of the suspension of our overflying in Russian airspace as a result of the Russia-Ukraine military conflict and an escalation of the broader economic consequences of the conflict beyond their current scope; and changes in general economic conditions in the markets in which the Company operates, including an economic downturn leading to a decrease in demand for air travel or fluctuations in foreign currency exchange rates that may impact international travel demand. We continue to monitor the potential favorable or unfavorable impacts of these and other factors on our business, operations, financial condition and future results of operations, which are dependent on future developments, including as a result of those factors discussed in Item 1A. Risk Factors, of the 2022 Form 10-K. Our future results of operations may be subject to volatility and our growth plans may be delayed, particularly in the short term, due to the impact of

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the above factors and trends. Absent significant and prolonged COVID-19 relapses or global economic disruptions, we believe that the expected long-term increase in travel demand will offset increased costs and that the expected operational challenges can be managed in a manner that will allow us to support increased demand.

RESULTS OF OPERATIONS

The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three and six months ended June 30, 2023, as compared to the corresponding periods in 2022.

Second Quarter 2023 Compared to Second Quarter 2022

The Company recorded net income of $1.1 billion for the second quarter of 2023 as compared to net income of $329 million for the second quarter of 2022. The Company considers a key measure of its performance to be operating income, which was $1.5 billion for the second quarter of 2023, as compared to $878 million for the second quarter of 2022, an approximately $639 million increase year-over-year, primarily as a result of increased demand for air travel. Significant components of the Company's operating results for the three months ended June 30 are as follows (in millions, except percentage changes):

						2023						2022						Increase (Decrease)						% Change
Operating revenue						$	14,178					$	12,112					$	2,066					17.1
Operating expense						12,661						11,234						1,427						12.7
Operating income						1,517						878						639						72.8
Nonoperating expense, net						(130)						(419)						(289)						(69.0)
Income tax expense						312						130						182						140.0
Net income						$	1,075					$	329					$	746					226.7

Certain consolidated statistical information for the Company's operations for the three months ended June 30 is as follows:

			2023						2022						Increase (Decrease)						% Change
Passengers (thousands) (a)			41,945						37,923						4,022						10.6
Revenue passenger miles ("RPMs" or "traffic") (millions) (b)			63,541						54,302						9,239						17.0
Available seat miles ("ASMs" or "capacity") (millions) (c)			73,538						62,605						10,933						17.5
Passenger load factor (d)			86.4		%				86.7		%				(0.3) pts.						N/A
Passenger revenue per available seat mile ("PRASM") (cents)			17.68						17.30						0.38						2.2
Total revenue per ASM ("TRASM") (cents)			19.28						19.35						(0.07)						(0.4)
Average yield per revenue passenger mile ("Yield") (cents) (e)			20.46						19.94						0.52						2.6
Cargo revenue ton miles ("CTM") (millions) (f)			768						752						16						2.1
Cost per ASM ("CASM") (cents)			17.22						17.94						(0.72)						(4.0)
CASM-ex (Non-GAAP) (cents) (g)			11.85						11.62						0.23						2.0
Average price per gallon of fuel, including fuel taxes			$	2.66					$	4.18					$	(1.52)					(36.4)
Fuel gallons consumed (millions)			1,062						912						150						16.4
Employee headcount, as of June 30			99,800						91,200						8,600						9.4
(a) The number of revenue passengers measured by each flight segment flown.
(b) The number of scheduled miles flown by revenue passengers.
(c) The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown.
(d) Revenue passenger miles divided by available seat miles.
(e) The average passenger revenue received for each revenue passenger mile flown.
(f) The number of cargo revenue tons transported multiplied by the number of miles flown.
(g) CASM excluding fuel, profit sharing, third-party business expense and special charges. See "Supplemental Information" below for a reconciliation to CASM, the most directly comparable GAAP measure.

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Operating Revenue. The table below shows year-over-year comparisons by type of operating revenue for the three months ended June 30 (in millions, except for percentage changes):

			2023						2022						Increase (Decrease)						% Change
Passenger revenue			$	13,002					$	10,829					$	2,173					20.1
Cargo			362						574						(212)						(36.9)
Other operating revenue			814						709						105						14.8
Total operating revenue			$	14,178					$	12,112					$	2,066					17.1

The table below presents selected second quarter passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes:

			Increase (decrease) from 2022:
			Domestic						Atlantic						Pacific						Latin						Total
Passenger revenue (in millions)			$	555					$	836					$	687					$	95					$	2,173
Passenger revenue			7.8		%				38.5		%				160.5		%				8.8		%				20.1		%
Average fare per passenger			(1.1)		%				13.9		%				11.0		%				9.6		%				8.6		%
Yield			0.8		%				13.0		%				(4.3)		%				8.7		%				2.6		%
PRASM			(2.4)		%				15.5		%				20.4		%				8.9		%				2.2		%
Passengers			9.0		%				21.6		%				134.7		%				(0.7)		%				10.6		%
RPMs			6.9		%				22.5		%				172.4		%				0.2		%				17.0		%
ASMs			10.5		%				19.9		%				116.4		%				(0.1)		%				17.5		%
Passenger load factor (points)			(2.9)						1.8						17.3						0.2						(0.3)

Passenger revenue increased $2.2 billion, or 20.1%, in the second quarter of 2023 as compared to the year-ago period, primarily due to an increase in capacity of 17.5% as well as strength in yield, partially offset by a slight decrease in passenger load factor.

Cargo revenue decreased $212 million, or 36.9%, in the second quarter of 2023 as compared to the year-ago period, primarily due to lower yields as a result of increased market capacity and rate pressures.

Other operating revenue increased $105 million, or 14.8%, in the second quarter of 2023 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending with the co-branded credit card partner, JPMorgan Chase Bank, N.A., as well as an increase in the purchases of United Club memberships and one-time lounge passes.

Operating Expenses. The table below includes data related to the Company's operating expenses for the three months ended June 30 (in millions, except for percentage changes):

			2023						2022						Increase (Decrease)						% Change
Salaries and related costs			$	3,710					$	2,836					$	874					30.8
Aircraft fuel			2,820						3,811						(991)						(26.0)
Landing fees and other rent			765						668						97						14.5
Aircraft maintenance materials and outside repairs			686						527						159						30.2
Depreciation and amortization			669						611						58						9.5
Regional capacity purchase			599						567						32						5.6
Distribution expenses			487						393						94						23.9
Aircraft rent			49						67						(18)						(26.9)
Special charges			859						112						747						NM
Other operating expenses			2,017						1,642						375						22.8
Total operating expenses			$	12,661					$	11,234					$	1,427					12.7

Salaries and related costs increased $874 million, or 30.8%, in the second quarter of 2023 as compared to the year-ago period, primarily due to a 9.4% increase in headcount from increased flight activity, annual wage rate increases, accruals for pay rate increases related to a potential new collective bargaining agreement with employees represented by the Air Line Pilots Association ("ALPA") and an increase of $220 million in profit sharing.

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Aircraft fuel expense decreased by $991 million, or 26.0%, in the second quarter of 2023 as compared to the year-ago period, due to a lower average price per gallon of fuel, partially offset by increased consumption from higher flight activity. The table below presents the significant changes in aircraft fuel cost per gallon in the three months ended June 30, 2023 as compared to the year-ago period (in millions, except percentage change and per gallon data):

			2023						2022						Increase (Decrease)						% Change
Fuel expense			$	2,820					$	3,811					$	(991)					(26.0)		%
Fuel consumption (gallons)			1,062						912						150						16.4		%
Average price per gallon			$	2.66					$	4.18					$	(1.52)					(36.4)		%

Landing fees and other rent increased $97 million, or 14.5%, in the second quarter of 2023 as compared to the year-ago period, primarily due to increased flying driving higher landed weight volume and a higher number of enplaned passengers.

Aircraft maintenance materials and outside repairs increased $159 million, or 30.2%, in the second quarter of 2023 as compared to the year-ago period, primarily due to increased flight activity and increased volumes of both engine overhauls and airframe heavy maintenance checks.

Depreciation expense increased $58 million, or 9.5%, in the second quarter of 2023 as compared to the year-ago period, primarily due to new aircraft inducted into service.

Regional capacity purchase increased $32 million, or 5.6%, in the second quarter of 2023 as compared to the year-ago period despite a 15% reduction in regional capacity, primarily due to rate increases under various capacity purchase agreements with regional carriers.

Distribution expenses increased $94 million, or 23.9%, in the second quarter of 2023 as compared to the year-ago period, primarily due to higher credit card fees, agency commissions and global distribution fees driven by the overall increase in passenger revenue. Distribution expenses were also impacted by a higher proportion of business travel in the current year as compared to leisure travel, which can result in higher cost distribution channels and forms of payment.

Details of the Company's special charges include the following for the three months ended June 30 (in millions):

			2023						2022
Labor contract ratification bonuses			$	813					$	—
(Gains) losses on sale of assets and other special charges			46						112
Special charges			$	859					$	112

See Note 9 to the financial statements included in Part I, Item 1 of this report for additional information on the Company's special charges.

Other operating expenses increased $375 million, or 22.8%, in the second quarter of 2023 as compared to the year ago period, primarily due to increases in ground handling, passenger services, food and beverage offerings and consumption, navigation fees and personnel-related costs as a direct result of the increase in flight activity and inflationary pressures and higher expenditures on information technology projects and services.

Nonoperating Income (Expense*).* The table below shows year-over-year comparisons of the Company's nonoperating income (expense) for the three months ended June 30 (in millions, except for percentage changes):

			2023						2022						Increase (Decrease)						% Change
Interest expense			$	(493)					$	(420)					$	73					17.4
Interest income			216						33						183						NM
Interest capitalized			42						22						20						90.9
Unrealized gains (losses) on investments, net			84						(40)						124						NM
Miscellaneous, net			21						(14)						35						NM
Total			$	(130)					$	(419)					$	(289)					(69.0)

Interest expense increased $73 million, or 17.4%, in the second quarter of 2023 as compared to the year-ago period, primarily due to higher interest rates on variable rate debt.

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Interest income increased $183 million in the second quarter of 2023 as compared to the year-ago period, primarily due to higher short-term investments in U.S. government and agency notes as well as higher interest rates.

Unrealized gains on investments, net, was $84 million in the second quarter of 2023 as compared to $40 million in unrealized losses in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities. See Note 6 to the financial statements included in Part I, Item 1 of this report for information related to these equity investments.

Income Taxes. See Note 4 to the financial statements included in Part I, Item 1 of this report for information related to income taxes.

First Six Months 2023 Compared to First Six Months 2022

The Company recorded net income of $0.9 billion in the first six months of 2023 as compared to a net loss of $1.0 billion in the first six months of 2022. The Company's operating income was $1.5 billion for the first six months of 2023, as compared to an operating loss of $498 million for the first six months of 2022, an approximately $2.0 billion increase year-over-year, primarily as a result of increased demand for air travel. Significant components of the Company's operating results for the six months ended June 30 are as follows (in millions, except percentage changes):

						2023						2022						Increase (Decrease)						% Change
Operating revenue						$	25,607					$	19,678					$	5,929					30.1
Operating expense						24,133						20,176						3,957						19.6
Operating income (loss)						1,474						(498)						1,972						NM
Nonoperating expense, net						(343)						(795)						(452)						(56.9)
Income tax expense (benefit)						250						(245)						495						NM
Net income (loss)						$	881					$	(1,048)					$	1,929					NM

Certain consolidated statistical information for the Company's operations for the six months ended June 30 is as follows:

			2023						2022						Increase (Decrease)						% Change
Passengers (thousands)			78,767						67,256						11,511						17.1
RPMs (millions)			116,073						92,946						23,127						24.9
ASMs (millions)			139,258						115,869						23,389						20.2
Passenger load factor			83.4		%				80.2		%				3.2 pts.						N/A
PRASM (cents)			16.71						14.82						1.89						12.8
TRASM (cents)			18.39						16.98						1.41						8.3
Yield (cents)			20.05						18.48						1.57						8.5
CTM (millions)			1,499						1,543						(44)						(2.9)
CASM (cents)			17.33						17.41						(0.08)						(0.5)
CASM-ex (Non-GAAP) (cents) (a)			12.18						12.05						0.13						1.1
Average price per gallon of fuel, including fuel taxes			$	2.98					$	3.58					$	(0.60)					(16.8)
Fuel gallons consumed (millions)			2,014						1,687						327						19.4
Employee headcount, as of June 30			99,800						91,200						8,600						9.4
(a) See "Supplemental Information" below for a reconciliation to CASM, the most directly comparable GAAP measure.

Operating Revenue. The table below shows year-over-year comparisons by type of operating revenue for the six months ended June 30 (in millions, except for percentage changes):

			2023						2022						Increase (Decrease)						% Change
Passenger revenue			$	23,276					$	17,177					$	6,099					35.5
Cargo			760						1,201						(441)						(36.7)
Other operating revenue			1,571						1,300						271						20.8
Total operating revenue			$	25,607					$	19,678					$	5,929					30.1

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The table below presents selected passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes for the six months ended June 30, 2023 compared to the six months ended June 30, 2022:

			Increase (decrease) from 2022:
			Domestic						Atlantic						Pacific						Latin						Total
Passenger revenue (in millions)			$	2,530					$	1,639					$	1,422					$	508					$	6,099
Passenger revenue			21.7		%				54.9		%				217.1		%				27.1		%				35.5		%
Average fare per passenger			5.7		%				14.3		%				13.2		%				22.5		%				15.7		%
Yield			7.6		%				15.1		%				(5.1)		%				21.9		%				8.5		%
PRASM			7.7		%				19.4		%				51.8		%				31.9		%				12.8		%
Passengers			15.2		%				35.6		%				180.2		%				3.8		%				17.1		%
RPMs			13.1		%				34.7		%				234.2		%				4.3		%				24.9		%
ASMs			13.0		%				29.8		%				109.1		%				(3.6)		%				20.2		%
Passenger load factor (points)			0.1						2.9						30.5						6.6						3.2

Passenger revenue increased $6.1 billion, or 35.5%, in the first six months of 2023 as compared to the year-ago period, primarily due to an increase in capacity of 20.2% as well as strength in both yield and passenger load factor.

Cargo revenue decreased $441 million, or 36.7%, in the first six months of 2023 as compared to the year-ago period, primarily due to lower yields and tonnage as a result of increased market capacity and rate pressures.

Other operating revenue increased $271 million, or 20.8%, in the first six months of 2023 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending and new credit card member acquisitions with the co-branded credit card partner, JPMorgan Chase Bank, N.A., as well as United Club re-openings and related increases in the purchases of United Club memberships and one-time lounge passes as compared to the year-ago period.

Operating Expenses. The table below includes data related to the Company's operating expenses for the six months ended June 30 (in millions, except for percentage changes):

			2023						2022						Increase (Decrease)						% Change
Salaries and related costs			$	7,032					$	5,623					$	1,409					25.1
Aircraft fuel			5,994						6,041						(47)						(0.8)
Landing fees and other rent			1,482						1,280						202						15.8
Aircraft maintenance materials and outside repairs			1,388						934						454						48.6
Depreciation and amortization			1,324						1,222						102						8.3
Regional capacity purchase			1,214						1,132						82						7.2
Distribution expenses			890						619						271						43.8
Aircraft rent			105						128						(23)						(18.0)
Special charges			873						104						769						NM
Other operating expenses			3,831						3,093						738						23.9
Total operating expenses			$	24,133					$	20,176					$	3,957					19.6

Salaries and related costs increased $1.4 billion, or 25.1%, in the first six months of 2023 as compared to the year-ago period, primarily due to a 9.4% increase in headcount from increased flight activity, annual wage rate increases, accruals for pay rate increases related to a potential new collective bargaining agreement with employees represented by ALPA and an increase of $220 million in profit sharing.

Aircraft fuel expense decreased $47 million, or 0.8%, in the first six months of 2023 as compared to the year-ago period, primarily due to a lower average price per gallon of fuel, partially offset by increased consumption from higher flight activity. The table below presents the significant changes in aircraft fuel cost per gallon in the six months ended June 30, 2023, as compared to the year-ago period (in millions, except percentage change and per gallon data):

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			2023						2022						Increase (Decrease)						% Change
Fuel expense			$	5,994					$	6,041					$	(47)					(0.8)		%
Fuel consumption (gallons)			2,014						1,687						327						19.4		%
Average price per gallon			$	2.98					$	3.58					$	(0.60)					(16.8)		%

Landing fees and other rent increased $202 million, or 15.8%, in the first six months of 2023 as compared to the year-ago period, primarily due to increased flying driving higher landed weight volume and a higher number of enplaned passengers.

Aircraft maintenance materials and outside repairs increased $454 million, or 48.6%, in the first six months of 2023 as compared to the year-ago period, primarily due to increased flight activity and increased volumes of both engine overhauls and airframe heavy maintenance checks.

Depreciation expense increased $102 million, or 8.3%, in the first six months of 2023 as compared to the year-ago period, primarily due to new aircraft inducted into service.

Regional capacity purchase increased $82 million, or 7.2%, in the first six months of 2023 as compared to the year-ago period despite a 17% reduction in regional capacity, primarily due to rate increases under various capacity purchase agreements with regional carriers.

Distribution expenses increased $271 million, or 43.8%, in the first six months of 2023 as compared to the year-ago period, primarily due to higher credit card fees, higher travel agency commissions and higher volumes of global distribution fees as a result of the overall increase in passenger revenue. Distribution expenses were also impacted by the mix of leisure travel and business travel in the current year, which requires the use of different distribution channels and forms of payment.

Details of the Company's special charges include the following for the six months ended June 30 (in millions):

			2023						2022
Labor contract ratification bonuses			$	813					$	—
(Gains) losses on sale of assets and other special charges			60						104
Special charges			$	873					$	104

See Note 9 to the financial statements included in Part I, Item 1 of this report for additional information on the Company's special charges.

Other operating expenses increased $738 million, or 23.9%, in the first six months of 2023 as compared to the year-ago period, primarily due to increases in ground handling, passenger services, food and beverage offerings and consumption, navigation fees and personnel-related costs as a direct result of the increase in flight activity and inflationary pressures and higher expenditures on information technology projects and services.

Nonoperating Income (Expense). The following table illustrates the year-over-year dollar and percentage changes in the Company's nonoperating income (expense) for the six months ended June 30 (in millions, except for percentage changes):

			2023						2022						Increase (Decrease)						% Change
Interest expense			$	(979)					$	(844)					$	135					16.0
Interest income			386						38						348						NM
Interest capitalized			80						46						34						73.9
Unrealized gains (losses) on investments, net			108						(40)						148						NM
Miscellaneous, net			62						5						57						NM
Total			$	(343)					$	(795)					$	(452)					(56.9)

Interest expense increased $135 million, or 16.0%, in the first six months of 2023 as compared to the year-ago period, primarily due to higher interest rates on variable rate debt.

Interest income increased $348 million in the first six months of 2023 as compared to the year-ago period, primarily due to higher short-term investments in U.S. government and agency notes. See Note 6 to the financial statements included in Part I, Item 1 of this report for additional information.

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Unrealized gains on investments, net, was $108 million in the first six months of 2023 as compared to $40 million in unrealized losses in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities. See Note 6 to the financial statements included in Part I, Item 1 of this report for information related to these equity investments.

Income Taxes. See Note 4 to the financial statements included in Part I, Item 1 of this report for information related to income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Current Liquidity

As of June 30, 2023, the Company had $19.1 billion in unrestricted cash, cash equivalents and short-term investments, as compared to $16.4 billion at December 31, 2022. We believe that our existing cash, cash equivalents and short-term investments, together with cash generated from operations, will be sufficient to satisfy our anticipated liquidity needs for the next twelve months, and we expect to meet our long-term liquidity needs with our anticipated access to the capital markets and projected cash from operations. We regularly assess our anticipated working capital needs, debt and leverage levels, debt maturities, capital expenditure requirements (including in connection with our capital commitments for our firm order aircraft) and future investments or acquisitions in order to maximize shareholder return, efficiently finance our ongoing operations and maintain flexibility for future strategic transactions. We also regularly evaluate our liquidity and capital structure to ensure financial risks, liquidity access and cost of capital are each managed efficiently.

The Company has a $1.75 billion revolving credit facility (the "Revolving Credit Facility") expiring April 21, 2025 (subject to customary extension rights). The Revolving Credit Facility is secured by certain route authorities and airport slots and gates. No borrowings were outstanding under the Revolving Credit Facility at June 30, 2023.

We have a significant amount of fixed obligations, including debt, leases of aircraft, airport and other facilities, and pension funding obligations. As of June 30, 2023, the Company had approximately $37.3 billion of debt, finance lease, operating lease and other financial liabilities, including $4.4 billion that will become due in the next 12 months. In addition, we have substantial noncancelable commitments for capital expenditures, including the acquisition of certain new aircraft and related spare engines. 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 June 30, 2023, UAL and United were in compliance with their respective debt covenants. As of June 30, 2023, a substantial portion of the Company's assets, principally aircraft and certain related assets, its loyalty program, certain route authorities and airport slots and gates, was pledged under various loan and other agreements. See Note 8 to the financial statements included in Part I, Item 1 of this report for additional information on aircraft financing and other debt instruments.

The Company has backstop financing commitments available from certain of its aircraft manufacturers for a limited number of its future aircraft deliveries, subject to certain customary conditions. See Note 7 to the financial statements included in Part I, Item I of this report for additional information on commitments.

As of June 30, 2023, United had firm commitments to purchase aircraft from The Boeing Company ("Boeing") and Airbus S.A.S. ("Airbus") as presented in the table below:

												Contractual Aircraft Deliveries																		Expected Aircraft Deliveries (b)
Aircraft Type						Number of Firm Commitments (a)						Last Six Months of 2023						2024						After 2024						Last Six Months of 2023						2024						After 2024
787						100						—						8						92						—						8						92
737 MAX						392						91						91						210						50						74						268
A321neo						70						12						21						37						4						29						37
A321XLR						50						—						—						50						—						—						50
A350						45						—						—						45						—						—						45
(a) United also has options and purchase rights for additional aircraft.
(b) Expected aircraft deliveries reflect adjustments communicated by Boeing and Airbus or estimated by United.

The aircraft listed in the table above are scheduled for delivery through 2033. The amount and timing of the Company's future capital commitments could change to the extent that: (i) the Company and the aircraft manufacturers, with whom the Company has existing orders for new aircraft, agree to modify the contracts governing those orders; (ii) rights are exercised pursuant to

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the relevant agreements to modify the timing of deliveries; or (iii) the aircraft manufacturers are unable to deliver in accordance with the terms of those orders.

The table below summarizes United's commitments as of June 30, 2023, which include aircraft and related spare engines, aircraft improvements and non-aircraft capital commitments. Aircraft commitments are based on contractual scheduled aircraft deliveries without any adjustments communicated by Boeing and Airbus or estimated by United.

(in billions)
Last six months of 2023						$	6.8
2024						6.9
2025						8.2
2026						6.2
2027						4.6
After 2027						16.6
						$	49.3

Sources and Uses of Cash

The following table summarizes our cash flows for the six months ended June 30 (in millions):

						2023						2022						Increase (Decrease)
Total cash provided by (used in):
Operating activities						$	6,941					$	4,167					$	2,774
Investing activities						(3,427)						(3,914)						(487)
Financing activities						(1,054)						(1,654)						(600)
Net increase (decrease) in cash, cash equivalents and restricted cash						$	2,460					$	(1,401)					$	3,861

Operating Activities. Cash flows provided by operations increased $2.8 billion in the first six months of 2023 as compared to the year-ago period, primarily due to an increase in operating income as improvements in the demand for air travel continued.

Investing Activities. Cash flows used in investing activities decreased $487 million in the first six months of 2023 as compared to the year-ago period, primarily due to an increase in proceeds from the sale of short-term and other investments, partially offset by an increase in capital expenditures, which were approximately $3.3 billion and $1.0 billion for the six months ended June 30, 2023 and 2022, respectively. Capital expenditures for the six months ended June 30, 2023 were primarily attributable to the purchase of aircraft, aircraft improvements and advance deposits for future aircraft purchases.

Financing Activities. Significant financing events in the six months ended June 30, 2023 were as follows:

Debt, Finance Lease and Other Financing Liability Principal Payments. During the six months ended June 30, 2023 and 2022, the Company made payments for debt, finance leases, and other financing liabilities of $2.6 billion and $1.8 billion, respectively. The payments in the first six months of 2023 included a prepayment of $1.0 billion for a 2021 term loan facility.

Debt and Other Financing Liabilities Issuances. During the six months ended June 30, 2023, United received and recorded, net of fees, $2.2 billion from aircraft financings.

See Note 8 to the financial statements included in Part I, Item 1 of this report for additional information.

Credit Ratings. As of the filing date of this report, UAL and United had the following corporate credit ratings:

			S&P						Moody's						Fitch
UAL			BB-						Ba2						B+
United			BB-						*						B+
*The credit agency does not issue corporate credit ratings for subsidiary entities.

These credit ratings are below investment grade levels; however, the Company has been able to secure financing with investment grade credit ratings for certain enhanced equipment trust certificates (EETCs), term loans and secured bond

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financings. Downgrades from these rating levels, among other things, could restrict the availability, or increase the cost, of future financing for the Company as well as affect the fair market value of existing debt. A rating reflects only the view of a rating agency and is not a recommendation to buy, sell or hold securities. Ratings can be revised upward or downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change.

Commitments, Contingencies and Liquidity Matters. As described in the 2022 Form 10-K, the Company's liquidity may be adversely impacted by a variety of factors, including, but not limited to, pension funding obligations, reserve requirements associated with credit card processing agreements, guarantees, commitments and contingencies.

See the 2022 Form 10-K and Notes 6, 7 and 8 to the financial statements contained in Part I, Item 1 of this report for additional information.

CRITICAL ACCOUNTING POLICIES

See "Critical Accounting Policies" in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2022 Form 10-K.

Supplemental Information

The Company evaluates its financial performance utilizing various GAAP and non-GAAP financial measures, including CASM-ex. The Company has provided CASM-ex, a non-GAAP financial measure, which is not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measure that is calculated and presented in accordance with GAAP. Management believes that adjusting for special charges (credits) is useful to investors because special charges (credits) are not indicative of UAL's ongoing performance. Management also believes that excluding third-party business expenses, such as expenses associated with maintenance and ground handling for third parties from CASM, provides more meaningful disclosure because these expenses are not directly related to the Company's core business. Management also believes that excluding fuel costs from CASM is useful to investors because it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence. Management also believes that excluding profit sharing from CASM allows investors to better understand and analyze the Company's operating cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.

Because this non-GAAP financial measure is not calculated in accordance with GAAP, it should not be considered superior to, and is not intended to be considered in isolation or as a substitute for, the related GAAP financial measure and may not be the same as or comparable to any similarly titled measures presented by other companies due to possible differences in method and in the items being adjusted. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Below is a reconciliation of the non-GAAP financial measure provided in this report (CASM-ex) to the most directly comparable GAAP financial measure (CASM) (in cents):

			Three Months Ended June 30,												Six Months Ended June 30,
			2023						2022						2023						2022
CASM (GAAP)			17.22						17.94						17.33						17.41
Fuel expense			3.84						6.09						4.30						5.21
Special charges			1.17						0.17						0.63						0.09
Profit sharing			0.30						—						0.16						—
Third-party business expenses			0.06						0.06						0.06						0.06
CASM-ex (Non-GAAP)			11.85						11.62						12.18						12.05

FORWARD-LOOKING INFORMATION

This report contains certain "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including in Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere, relating to, among other things, goals, plans and projections regarding the Company's financial position, results of operations, market position, capacity, fleet, product development, ESG targets and business strategy. Such forward-looking statements are based on historical performance and current expectations, estimates, forecasts and projections about the Company's future financial results, goals, plans and objectives and involve inherent risks, assumptions and uncertainties, known or unknown, including internal or external factors that could delay, divert or change any of them, that are difficult to predict, may be beyond the Company's control and could

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cause the Company's future financial results, goals, plans and objectives to differ materially from those expressed in, or implied by, the statements. Words such as "should," "could," "would," "will," "may," "expects," "plans," "intends," "anticipates," "indicates," "remains," "believes," "estimates," "projects," "forecast," "guidance," "outlook," "goals," "targets," "pledge," "confident," "optimistic," "dedicated," "positioned," and other words and terms of similar meaning and expression are intended to identify forward-looking statements, although not all forward-looking statements contain such terms. All statements, other than those that relate solely to historical facts, are forward-looking statements.

Additionally, forward-looking statements include conditional statements and statements that identify uncertainties or trends, discuss the possible future effects of known trends or uncertainties, or that indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this report are based upon information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law or regulation.

Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: execution risks associated with our strategic operating plan; changes in our network strategy or other factors outside our control resulting in less economic aircraft orders, costs related to modification or termination of aircraft orders or entry into less favorable aircraft orders, as well as any inability to accept or integrate new aircraft into our fleet as planned; any failure to effectively manage, and receive anticipated benefits and returns from, acquisitions, divestitures, investments, joint ventures and other portfolio actions, as well as related costs or other issues, or related exposures to unknown liabilities or other issues or underperformance as compared to our expectations; the adverse impacts of the ongoing COVID-19 global pandemic on our business, operating results, financial condition and liquidity; adverse publicity, harm to our brand, reduced travel demand, potential tort liability and voluntary or mandatory operational restrictions as a result of an accident, catastrophe or incident involving us, our regional carriers, our codeshare partners or another airline; the highly competitive nature of the global airline industry and susceptibility of the industry to price discounting and changes in capacity, including as a result of alliances, joint business arrangements or other consolidations; our reliance on a limited number of suppliers to source a majority of our aircraft and certain parts, and the impact of any failure to obtain timely deliveries, additional equipment or support from any of these suppliers; disruptions to our regional network and United Express flights provided by third-party regional carriers; unfavorable economic and political conditions in the United States and globally; reliance on third-party service providers and the impact of any significant failure of these parties to perform as expected, or interruptions in our relationships with these providers or their provision of services; extended interruptions or disruptions in service at major airports where we operate and space, facility and infrastructure constraints at our hubs or other airports; geopolitical conflict, terrorist attacks or security events; any damage to our reputation or brand image; our reliance on technology and automated systems to operate our business and the impact of any significant failure or disruption of, or failure to effectively integrate and implement, the technology or systems; increasing privacy and data security obligations or a significant data breach; increased use of social media platforms by us, our employees and others; the impacts of union disputes, employee strikes or slowdowns, and other labor-related disruptions or regulatory compliance costs on our operations or financial performance; any failure to attract, train or retain skilled personnel, including our senior management team or other key employees; the monetary and operational costs of compliance with extensive government regulation of the airline industry; current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or arrangement relating to these actions; costs, liabilities and risks associated with environmental regulation and climate change, including our climate goals; high and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel; the impacts of our significant amount of financial leverage from fixed obligations and the impacts of insufficient liquidity on our financial condition and business; failure to comply with financial and other covenants governing our debt, including our MileagePlus® financing agreements; the impacts of the proposed phase out of the London interbank offer rate; limitations on our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income for U.S. federal income tax purposes; our failure to realize the full value of our intangible assets or our long-lived assets, causing us to record impairments; fluctuations in the price of our common stock; the impacts of seasonality and other factors associated with the airline industry; increases in insurance costs or inadequate insurance coverage and other risks and uncertainties set forth under Part I, Item 1A. Risk Factors, of the 2022 Form 10-K, and under "Economic and Market Factors" in Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, of this report, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC.

The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change. For instance, we regularly

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monitor future demand and booking trends and adjust capacity, as needed. As such, our actual flown capacity may differ materially from currently published flight schedules or current estimations.

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