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

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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", "Governmental Actions" and "Forward-Looking Information", 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") and in Part II, Item 1A. Risk Factors in this report. The Company discusses certain financial measures that are not calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"); 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 economic and market 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; 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, future results of operations, liquidity and financial flexibility, which are dependent on future developments, including as a result of those factors discussed in Part I, Item 1A. Risk Factors, of the 2022 Form 10-K and in Part II, Item 1A. Risk Factors in this report. 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 the above factors and trends.

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Governmental Actions

We operate in complex, highly regulated environments in the U.S., the European Union, the UK and other regions around the world. Compliance with laws, regulations, administrative practices and other restrictions or legal requirements in the countries in which we do business is onerous and expensive. In addition, changes to existing legal requirements, new legal requirements and any failure to comply with legal requirements could negatively impact our business, operations, financial condition, future results of operations, liquidity and financial flexibility by increasing the Company's costs, limiting the Company's ability to offer a product, service or feature to customers, impacting customer demand for the Company's products and services and requiring changes to the Company's supply chain and its business. Legal requirements that we currently believe are or will be most impactful to our results of operations and financial condition include the following: governmental regulations and restrictions relating to the COVID-19 global pandemic, the lasting effects of 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 to Tel Aviv as a result of the Israeli-Palestinian military conflict and an escalation of the broader economic consequences of the conflicts beyond their current scope; and any legal requirement that would result in a reshaping of the benefits that we provide to our consumers through the co-branded credit cards issued by our partner. Changes in existing applicable legal requirements or new applicable legal requirements and the related interpretations and enforcement practices of them create uncertainty about how such laws and regulations will be interpreted and applied. As a result, the impact of changing and new legal requirements generally cannot be reasonably predicted and those requirements may ultimately require extensive system and operational changes, be difficult to implement, increase our operating costs and require significant capital expenditures.

RESULTS OF OPERATIONS

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

Third Quarter 2023 Compared to Third Quarter 2022

The Company recorded net income of $1.1 billion for the third quarter of 2023 as compared to $942 million for the third quarter of 2022. The Company considers a key measure of its performance to be operating income, which was $1.7 billion for the third quarter of 2023, as compared to $1.5 billion for the third quarter of 2022, an approximately $281 million increase year-over-year, primarily as a result of increased demand for air travel and lower fuel costs. Significant components of the Company's operating results for the three months ended September 30 are as follows (in millions, except percentage changes):

20232022Increase (Decrease)% Change
Operating revenue$14,484$12,877$1,60712.5
Operating expense12,74511,4191,32611.6
Operating income1,7391,45828119.3
Nonoperating expense, net(254)(305)(51)(16.7)
Income tax expense34821113764.9
Net income$1,137$942$19520.7
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Certain consolidated statistical information for the Company's operations for the three months ended September 30 is as follows:

20232022Increase (Decrease)% Change
Passengers (thousands) (a)44,38138,8025,57914.4
Revenue passenger miles ("RPMs" or "traffic") (millions) (b)67,69159,0878,60414.6
Available seat miles ("ASMs" or "capacity") (millions) (c)78,34867,69510,65315.7
Passenger load factor (d)86.4%87.3%(0.9) pts.N/A
Passenger revenue per available seat mile ("PRASM") (cents)17.0417.21(0.17)(1.0)
Total revenue per ASM ("TRASM") (cents)18.4919.02(0.53)(2.8)
Average yield per revenue passenger mile ("Yield") (cents) (e)19.7219.72——
Cargo revenue ton miles ("CTM") (millions) (f)766733334.5
Cost per ASM ("CASM") (cents)16.2716.87(0.60)(3.6)
CASM-ex (Non-GAAP) (cents) (g)11.5111.220.292.6
Average price per gallon of fuel, including fuel taxes$2.95$3.81$(0.86)(22.6)
Fuel gallons consumed (millions)1,13298514714.9
Employee headcount, as of September 30102,00090,80011,20012.3
(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.

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

20232022Increase (Decrease)% Change
Passenger revenue$13,349$11,653$1,69614.6
Cargo333498(165)(33.1)
Other operating revenue8027267610.5
Total operating revenue$14,484$12,877$1,60712.5

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

Increase (decrease) from 2022:
DomesticAtlanticPacificLatinTotal
Passenger revenue (in millions)$613$446$599$38$1,696
Passenger revenue8.7%15.4%92.7%3.6%14.6%
Average fare per passenger(4.9)%6.8%7.4%(4.3)%0.2%
Yield(1.7)%6.6%2.9%(5.8)%—%
PRASM(2.1)%4.0%3.8%(5.9)%(1.0)%
Passengers14.3%8.1%79.4%8.3%14.4%
RPMs10.5%8.3%87.3%9.9%14.6%
ASMs10.9%10.9%85.7%10.1%15.7%
Passenger load factor (points)(0.3)(2.2)0.7(0.1)(0.9)

Passenger revenue increased $1.7 billion, or 14.6%, in the third quarter of 2023 as compared to the year-ago period, primarily due to a 15.7% increase in capacity, partially offset by a slight decrease in passenger load factor.

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Cargo revenue decreased $165 million, or 33.1%, in the third 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 $76 million, or 10.5%, in the third 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, visitor volume and purchases of one-time lounge passes.

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

20232022Increase (Decrease)% Change (a)
Salaries and related costs$3,914$2,843$1,07137.7
Aircraft fuel3,3423,755(413)(11.0)
Landing fees and other rent80163916225.4
Aircraft maintenance materials and outside repairs6846196510.5
Depreciation and amortization663610538.7
Regional capacity purchase592596(4)(0.7)
Distribution expenses516482347.1
Aircraft rent4665(19)(29.2)
Special charges29209NM
Other operating expenses2,1581,79036820.6
Total operating expenses$12,745$11,419$1,32611.6
(a) NM - Greater than 100% change or otherwise not meaningful.

Salaries and related costs increased $1.1 billion, or 37.7%, in the third quarter of 2023 as compared to the year-ago period, primarily due to approximately 12% increase in headcount from increased flight activity, accruals for pay rate increases related to a new collective bargaining agreement with employees represented by the Air Line Pilots Association ("ALPA"), annual wage rate increases across employee groups and an increase of $293 million in profit sharing expense due to both an increase in pre-tax income and a change in the profit sharing formula as a result of the new pilot agreement.

Aircraft fuel expense decreased by $413 million, or 11.0%, in the third 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 September 30, 2023 as compared to the year-ago period (in millions, except percentage change and per gallon data):

20232022Increase (Decrease)% Change
Fuel expense$3,342$3,755$(413)(11.0)%
Fuel consumption (gallons)1,13298514714.9%
Average price per gallon$2.95$3.81$(0.86)(22.6)%

Landing fees and other rent increased $162 million, or 25.4%, in the third 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 $65 million, or 10.5%, in the third quarter of 2023 as compared to the year-ago period, primarily due to increased flight activity driving higher maintenance materials usage and increased volumes of both engine overhauls and airframe heavy maintenance checks.

Depreciation expense increased $53 million, or 8.7%, in the third quarter of 2023 as compared to the year-ago period, primarily due to new aircraft inducted into service.

Distribution expenses increased $34 million, or 7.1%, in the third 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.

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

20232022
Labor contract ratification bonuses$1$—
(Gains) losses on sale of assets and other special charges2820
Special charges$29$20

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 $368 million, or 20.6%, in the third 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 September 30 (in millions, except for percentage changes):

20232022Increase (Decrease)% Change
Interest expense$(493)$(455)$388.4
Interest income234104130NM
Interest capitalized48272177.8
Unrealized gains (losses) on investments, net(54)28(82)NM
Miscellaneous, net11(9)(20)NM
Total$(254)$(305)$(51)(16.7)

Interest expense increased $38 million, or 8.4%, in the third quarter of 2023 as compared to the year-ago period, primarily due to higher interest rates on variable rate debt and new debt issuances in the current period, partially offset by reduced interest expense on the prepayment of $1.0 billion of debt in the second quarter of 2023.

Interest income increased $130 million in the third quarter of 2023 as compared to the year-ago period, primarily due to higher short-term investments in U.S. government and agency notes.

Unrealized losses on investments, net, was $54 million in the third quarter of 2023 as compared to $28 million in unrealized gains 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 Nine Months 2023 Compared to First Nine Months 2022

The Company recorded net income of $2.0 billion in the first nine months of 2023 as compared to a net loss of $106 million in the first nine months of 2022. The Company's operating income was $3.2 billion for the first nine months of 2023, as compared to $960 million for the first nine months of 2022, an approximately $2.3 billion increase year-over-year, primarily as a result of increased demand for air travel and lower fuel costs. Significant components of the Company's operating results for the nine months ended September 30 are as follows (in millions, except percentage changes):

20232022Increase (Decrease)% Change
Operating revenue$40,091$32,555$7,53623.1
Operating expense36,87831,5955,28316.7
Operating income3,2139602,253NM
Nonoperating expense, net(597)(1,100)(503)(45.7)
Income tax expense (benefit)598(34)632NM
Net income (loss)$2,018$(106)$2,124NM
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Certain consolidated statistical information for the Company's operations for the nine months ended September 30 is as follows:

20232022Increase (Decrease)% Change
Passengers (thousands)123,148106,05817,09016.1
RPMs (millions)183,764152,03331,73120.9
ASMs (millions)217,606183,56434,04218.5
Passenger load factor84.4%82.8%1.6 pts.N/A
PRASM (cents)16.8315.711.127.1
TRASM (cents)18.4217.730.693.9
Yield (cents)19.9318.960.975.1
CTM (millions)2,2652,276(11)(0.5)
CASM (cents)16.9517.21(0.26)(1.5)
CASM-ex (Non-GAAP) (cents) (a)11.9411.740.201.7
Average price per gallon of fuel, including fuel taxes$2.97$3.67$(0.70)(19.1)
Fuel gallons consumed (millions)3,1462,67247417.7
Employee headcount, as of September 30102,00090,80011,20012.3
(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 nine months ended September 30 (in millions, except for percentage changes):

20232022Increase (Decrease)% Change
Passenger revenue$36,625$28,830$7,79527.0
Cargo1,0931,699(606)(35.7)
Other operating revenue2,3732,02634717.1
Total operating revenue$40,091$32,555$7,53623.1

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

Increase (decrease) from 2022:
DomesticAtlanticPacificLatinTotal
Passenger revenue (in millions)$3,143$2,085$2,021$546$7,795
Passenger revenue16.8%35.5%NM18.6%27.0%
Average fare per passenger1.7%10.5%10.1%12.8%9.4%
Yield4.1%10.7%(1.9)%11.8%5.1%
PRASM4.0%11.4%27.7%18.1%7.1%
Passengers14.9%22.6%NM5.2%16.1%
RPMs12.2%22.3%NM6.1%20.9%
ASMs12.3%21.6%NM0.5%18.5%
Passenger load factor (points)(0.1)0.518.94.61.6

Passenger revenue increased $7.8 billion, or 27.0%, in the first nine months of 2023 as compared to the year-ago period, primarily due to an 18.5% increase in capacity as well as strength in both yield and passenger load factor.

Cargo revenue decreased $606 million, or 35.7%, in the first nine months 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 $347 million, or 17.1%, in the first nine 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.

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

20232022Increase (Decrease)% Change
Salaries and related costs$10,946$8,466$2,48029.3
Aircraft fuel9,3369,796(460)(4.7)
Landing fees and other rent2,2831,91936419.0
Aircraft maintenance materials and outside repairs2,0721,55351933.4
Depreciation and amortization1,9871,8321558.5
Regional capacity purchase1,8061,728784.5
Distribution expenses1,4061,10130527.7
Aircraft rent151193(42)(21.8)
Special charges902124778NM
Other operating expenses5,9894,8831,10622.7
Total operating expenses$36,878$31,595$5,28316.7

Salaries and related costs increased $2.5 billion, or 29.3%, in the first nine months of 2023 as compared to the year-ago period, primarily due to approximately 12% increase in headcount from increased flight activity, accruals for pay rate increases related to a new collective bargaining agreement with employees represented by ALPA, annual wage rate increases across employee groups and an increase of $513 million in profit sharing expense due to both an increase in pre-tax income and a change in the profit sharing formula as a result of the new pilot agreement.

Aircraft fuel expense decreased $460 million, or 4.7%, in the first nine 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 nine months ended September 30, 2023, as compared to the year-ago period (in millions, except percentage change and per gallon data):

20232022Increase (Decrease)% Change
Fuel expense$9,336$9,796$(460)(4.7)%
Fuel consumption (gallons)3,1462,67247417.7%
Average price per gallon$2.97$3.67$(0.70)(19.1)%

Landing fees and other rent increased $364 million, or 19.0%, in the first nine 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 $519 million, or 33.4%, in the first nine 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 $155 million, or 8.5%, in the first nine months of 2023 as compared to the year-ago period, primarily due to new aircraft inducted into service.

Regional capacity purchase increased $78 million, or 4.5%, in the first nine months of 2023 as compared to the year-ago period despite an approximately 16% reduction in regional capacity, primarily due to rate increases under various capacity purchase agreements with regional carriers.

Distribution expenses increased $305 million, or 27.7%, in the first nine months of 2023 as compared to the year-ago period, primarily due to higher credit card fees, travel agency commissions and global distribution fees driven by the overall increase in passenger revenue.

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

20232022
Labor contract ratification bonuses$814$—
(Gains) losses on sale of assets and other special charges88124
Special charges$902$124
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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 $1.1 billion, or 22.7%, in the first nine 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 nine months ended September 30 (in millions, except for percentage changes):

20232022Increase (Decrease)% Change
Interest expense$(1,472)$(1,299)$17313.3
Interest income620142478NM
Interest capitalized128735575.3
Unrealized gains (losses) on investments, net54(12)(66)NM
Miscellaneous, net73(4)(77)NM
Total$(597)$(1,100)$(503)(45.7)

Interest expense increased $173 million, or 13.3%, in the first nine months of 2023 as compared to the year-ago period, primarily due to higher interest rates on variable rate debt and new debt issuances in the current period, partially offset by reduced interest expense on the prepayment of $1.0 billion of debt in the second quarter of 2023.

Interest income increased $478 million in the first nine 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.

Unrealized gains on investments, net, was $54 million in the first nine months of 2023 as compared to $12 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.

Miscellaneous, net changed by $77 million in the first nine months of 2023 as compared to the year-ago period, primarily due to lower foreign exchange losses and higher benefit from the pensions and postretirement benefit plans.

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 September 30, 2023, the Company had $17.1 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 stockholder 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 September 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 September 30, 2023, the Company had approximately $36.7 billion of debt, finance lease, operating lease and other financial liabilities, including $4.6 billion that will become due in the next 12 months. In addition, we have

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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 September 30, 2023, UAL and United were in compliance with their respective debt covenants. As of September 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 September 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 DeliveriesExpected Aircraft Deliveries (b)
Aircraft TypeNumber of Firm Commitments (a)Last Three Months of 20232024After 2024Last Three Months of 20232024After 2024
787150—8142—8142
737 MAX374731002012077277
A321neo130426100426100
A321XLR50——50——50
A35045——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 the relevant agreements to cancel deliveries or modify the timing of deliveries; or (iii) the aircraft manufacturers are unable to deliver in accordance with the terms of those orders.

On September 28, 2023, United entered into a supplemental agreement with Boeing, pursuant to which United exercised options to purchase 50 Boeing 787-9 aircraft scheduled for delivery between 2028 and 2031 and was granted options to purchase up to an additional 50 Boeing 787 aircraft. In addition, on September 29, 2023, United entered into an amendment to the A320 Family Purchase Agreement, dated December 19, 2019, as amended, with Airbus, pursuant to which United exercised purchase rights to purchase 60 A321neo aircraft scheduled for delivery between 2028 and 2030 and was granted purchase rights to purchase up to an additional 40 A321neo aircraft. The table above reflects the number of firm commitments related to these agreements as well as the contractual and expected aircraft deliveries.

The table below summarizes United's firm commitments as of September 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 three months of 2023$4.6
20248.8
20258.0
20266.1
20275.0
After 202729.6
$62.1
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Sources and Uses of Cash

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

20232022Increase (Decrease)
Total cash provided by (used in):
Operating activities$7,821$4,908$2,913
Investing activities(5,363)(9,442)(4,079)
Financing activities(1,769)(2,472)(703)
Net increase (decrease) in cash, cash equivalents and restricted cash$689$(7,006)$7,695

Operating Activities. Cash flows provided by operations increased $2.9 billion in the first nine 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 $4.1 billion in the first nine months of 2023 as compared to the year-ago period, primarily due to a $7.6 billion increase in proceeds from the sale of short-term and other investments, partially offset by a $2.8 billion increase in capital expenditures. Capital expenditures were primarily attributable to the purchase of aircraft, aircraft improvements and advance deposits for future aircraft purchases.

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

Debt, Finance Lease and Other Financing Liability Principal Payments. During the nine months ended September 30, 2023 and 2022, the Company made payments for debt, finance leases, and other financing liabilities of $3.4 billion and $2.6 billion, respectively. The payments in the first nine months of 2023 included a prepayment of $1.0 billion for a 2021 term loan facility.

Debt and Other Financing Liabilities Issuances. On June 20, 2023, the Company and Wilmington Trust, National Association, as subordination agent and pass through trustee (the "Trustee") under a certain pass through trust newly formed by the Company, entered into the Note Purchase Agreement, dated as of June 20, 2023 (the "Note Purchase Agreement"). The Note Purchase Agreement provides for the issuance by the Company of equipment notes (the "Equipment Notes") in the aggregate principal amount of $1.3 billion to finance 39 Boeing aircraft delivered new to the Company from August 2022 to May 2023. Pursuant to the Note Purchase Agreement, the Trustee purchased Equipment Notes issued under a trust indenture and mortgage (each, an "Indenture" and, collectively, the "Indentures") with respect to each aircraft entered into by the Company and Wilmington Trust, National Association, as mortgagee. Each Indenture provides for the issuance of Equipment Notes in a single series, Series A, bearing interest at the rate of 5.80% per annum. The Equipment Notes were purchased by the Trustee, using the proceeds from the sale of Pass Through Certificates, Series 2023-1A, issued by a pass through trust newly-formed by the Company to facilitate the financing of the aircraft. The interest on the Equipment Notes is payable semi-annually on each January 15 and July 15, beginning on January 15, 2024. The principal payments on the Equipment Notes are scheduled on January 15 and July 15 of each year, beginning on July 15, 2024. The final payments on the Equipment Notes will be due on January 15, 2036.

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&PMoody'sFitch
UALBB-Ba2B+
UnitedBB-*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, term loans and secured bond 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.

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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 is useful to investors because special charges 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 September 30,Nine Months Ended September 30,
2023202220232022
CASM (GAAP)16.2716.8716.9517.21
Fuel expense4.265.554.295.34
Special charges0.040.030.420.07
Profit sharing0.390.010.24—
Third-party business expenses0.070.060.060.06
CASM-ex (Non-GAAP)11.5111.2211.9411.74

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-related strategy initiatives 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 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

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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 (including the continuation of the suspension of our overflying in Russian airspace as a result of the Russia-Ukraine military conflict and to Tel Aviv as a result of the Israeli-Palestinian military conflict and an escalation of the broader economic consequences of the conflicts beyond their current scope); 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 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 Part II, Item 1A. Risk Factors of this report, and under "Economic and Market Factors" and "Governmental Actions" 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 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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