FORM10-Q
| FORM 10-Q | ||
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number | Exact Name of Registrant as Specified in its Charter, Principal Executive Office Address and Telephone Number |
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| 001-06033 | United Continental Holdings, Inc.
| Delaware | 36-2675207 | |||||
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| 233 South Wacker Drive, Chicago, Illinois 60606 | ||||||
| (872)825-4000 | ||||||||
| 001-10323 | United Airlines, Inc. | Delaware | 74-2099724 | |||||
| 233 South Wacker Drive, Chicago, Illinois 60606 | ||||||||
| (872) 825-4000 | ||||||||
| United Continental Holdings, Inc. | Yes | |||||
| o | United Airlines, Inc. | Yes | o | |||
| United Continental Holdings, Inc. | Yes | |||||
| o | United Airlines, Inc. | Yes | o | |||
United Continental Holdings, Inc. | Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company | |||||
United Airlines, Inc. | Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company | |||||
| United Continental Holdings, Inc. | o | |||||
| United Airlines, Inc. | o | |||||
| United Continental Holdings, Inc. | Yes | x | ||||
| United Airlines, Inc. | Yes | x | ||||
United Continental Holdings, Inc. | ||||
United Airlines, Inc. | 1,000 shares of common stock ($0.01 par value)
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Operating revenue: Passenger revenue Cargo Other operating revenue Total operating revenue Operating expense: Salaries and related costs Aircraft fuel Regional capacity purchase Landing fees and other rent Depreciation and amortization Aircraft maintenance materials and outside repairs Distribution expenses Aircraft rent Special charges (Note 10) Other operating expenses Total operating expenses Operating income Nonoperating income (expense): Interest expense Interest capitalized Interest income Miscellaneous, net Total nonoperating expense, net Income before income taxes Income tax expense Net income Earnings per share, basic and diluted Net income Other comprehensive income (loss), net change related to: Employee benefit plans, net of taxes Investments and other, net of taxes Total other comprehensive income (loss), net Total comprehensive income, net ASSETS Current assets: Cash and cash equivalents Short-term investments Receivables, less allowance for doubtful accounts (2018 — $7; 2017 — $7) Aircraft fuel, spare parts and supplies, less obsolescence allowance (2018 — $365; 2017 — $354) Prepaid expenses and other Total current assets Operating property and equipment: Owned— Flight equipment Other property and equipment Total owned property and equipment Less — Accumulated depreciation and amortization Total owned property and equipment, net Purchase deposits for flight equipment Capital leases— Flight equipment Other property and equipment Total capital leases Less — Accumulated amortization Total capital leases, net Total operating property and equipment, net Other assets: Goodwill Intangibles, less accumulated amortization (2018 — $1,329; 2017 — $1,313) Restricted cash Investments in affiliates and other, net Total other assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Advance ticket sales Accounts payable Frequent flyer deferred revenue Accrued salaries and benefits Current maturities of long-term debt Current maturities of capital leases Other Total current liabilities Long-term debt Long-term obligations under capital leases Other liabilities and deferred credits: Frequent flyer deferred revenue Postretirement benefit liability Pension liability Deferred income taxes Lease fair value adjustment, net Other Total other liabilities and deferred credits Commitments and contingencies Stockholders’ equity: Preferred stock Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 279,410,451 and 286,973,195 shares at March 31, 2018 and December 31, 2017, respectively Additional capital invested Retained earnings Stock held in treasury, at cost Accumulated other comprehensive loss Total stockholders’ equity Total liabilities and stockholders’ equity Cash Flows from Operating Activities: Net cash provided by operating activities Cash Flows from Investing Activities: Capital expenditures Purchases of short-term and other investments Proceeds from sale of short-term and other investments Proceeds from sale of property and equipment Other, net Net cash used in investing activities Cash Flows from Financing Activities: Proceeds from issuance of long-term debt and airport construction financing Repurchases of common stock Payments of long-term debt Principal payments under capital leases Other, net Net cash provided (used) in financing activities Net increase (decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash at beginning of the period Cash, cash equivalents and restricted cash at end of the period (a) Investing and Financing Activities Not Affecting Cash: Property and equipment acquired through the issuance of debt and capital leases Airport construction financing (a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet: Reconciliation of cash, cash equivalents and restricted cash: Current assets: Cash and cash equivalents Restricted cash included in Prepaid expenses and other Other assets: Restricted cash Total cash, cash equivalents and restricted cash Operating revenue: Passenger revenue Cargo Other operating revenue Total operating revenue Operating expense: Salaries and related costs Aircraft fuel Regional capacity purchase Landing fees and other rent Depreciation and amortization Aircraft maintenance materials and outside repairs Distribution expenses Aircraft rent Special charges (Note 10) Other operating expenses Total operating expense Operating income Nonoperating income (expense): Interest expense Interest capitalized Interest income Miscellaneous, net Total nonoperating expense, net Income before income taxes Income tax expense Net income Net income Other comprehensive income (loss), net change related to: Employee benefit plans, net of taxes Investments and other, net of taxes Total other comprehensive income (loss), net Total comprehensive income, net ASSETS Current assets: Cash and cash equivalents Short-term investments Receivables, less allowance for doubtful accounts (2018 — $7; 2017 — $7) Aircraft fuel, spare parts and supplies, less obsolescence allowance (2018 — $365; 2017 — $354) Prepaid expenses and other Total current assets Operating property and equipment: Owned— Flight equipment Other property and equipment Total owned property and equipment Less — Accumulated depreciation and amortization Total owned property and equipment, net Purchase deposits for flight equipment Capital leases— Flight equipment Other property and equipment Total capital leases Less — Accumulated amortization Total capital leases, net Total operating property and equipment, net Other assets: Goodwill Intangibles, less accumulated amortization (2018 — $1,329; 2017 — $1,313) Restricted cash Investments in affiliates and other, net Total other assets Total assets Current liabilities: Advance ticket sales Accounts payable Frequent flyer deferred revenue Accrued salaries and benefits Current maturities of long-term debt Current maturities of capital leases Other Total current liabilities Long-term debt Long-term obligations under capital leases Other liabilities and deferred credits: Frequent flyer deferred revenue Postretirement benefit liability Pension liability Deferred income taxes Lease fair value adjustment, net Other Total other liabilities and deferred credits Commitments and contingencies Stockholder’s equity: Common stock at par, $0.01 par value; authorized 1,000 shares; issued and outstanding 1,000 shares at both March 31, 2018 and December 31, 2017 Additional capital invested Retained earnings Accumulated other comprehensive loss Receivable from related parties Total stockholder’s equity Total liabilities and stockholder’s equity Cash Flows from Operating Activities: Net cash provided by operating activities Cash Flows from Investing Activities: Capital expenditures Purchases of short-term investments and other investments Proceeds from sale of short-term and other investments Proceeds from sale of property and equipment Other, net Net cash used in investing activities Cash Flows from Financing Activities: Proceeds from issuance of long-term debt and airport construction financing Dividend to UAL Payments of long-term debt Principal payments under capital leases Other, net Net cash provided (used) in financing activities Net increase (decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash at beginning of the period Cash, cash equivalents and restricted cash at end of the period (a) Investing and Financing Activities Not Affecting Cash: Property and equipment acquired through the issuance of debt and capital leases Airport construction financing (a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet: Reconciliation of cash, cash equivalents and restricted cash: Current assets: Cash and cash equivalents Restricted cash included in Prepaid expenses and other Other assets: Restricted cash Total cash, cash equivalents and restricted cash Passenger revenue Cargo Other operating revenue Total operating revenue Salaries and related costs Distribution expenses Other operating expenses Total operating expenses Operating income Interest expense Miscellaneous, net Total nonoperating expense, net Income before income taxes Income tax expense Net income Earnings per share, basic and diluted Prepaid expenses and other Total current assets Total assets Advance ticket sales Frequent flyer deferred revenue Other Total current liabilities Frequent flyer deferred revenue - long-term Deferred income taxes Total other liabilities and deferred credits Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity For the portion of the outstanding miles that we estimate will not be redeemed, we recognize the associated value proportionally as the remaining miles are redeemed. MileagePlus miles awarded - United has a performance obligation to provide MileagePlus cardholders with miles to be used for air travel andnon-travel award redemptions. The Company records Passenger revenue related to the travel awards when the transportation is provided and records Other revenue related to thenon-travel awards when the goods or services are delivered. The Company records the cost associated withnon-travel awards in Other operating revenue. Marketing - Advertising - United has a performance obligation to provide advertising in support of the MileagePlus card in various customer contact points such as Other travel-related benefits - Total Frequent flyer deferred revenue—beginning balance Total miles awarded Travel miles redeemed (Passenger revenue) Non-travel miles redeemed (Other operating revenue) Total Frequent flyer deferred revenue—ending balance June 30, 2017, related to those revenues. Mainline Regional Domestic Atlantic Pacific Latin America International Consolidated Mainline Regional Consolidated Effect of employee stock awards Balance at December 31, 2017 Changes in value Amounts reclassified to earnings Amounts reclassified to retained earnings (a) Net change Balance at March 31, 2018 Changes in value Amounts reclassified to earnings Net change Details for AOCI Components Reclassified to Income Pension and other postretirement liabilities Amortization of unrecognized losses and prior service cost (a) Investments and Other Reclassifications of losses into earnings related to fuel derivative contracts Interest cost Total plans, respectively. Share-based compensation expense Unrecognized share-based compensation Cash and cash equivalents Short-term investments: Corporate debt Asset-backed securities U.S. government and agency notes Certificates of deposit placed through an account registry service (“CDARS”) Other fixed-income securities Other investments measured at net asset value (“NAV”) Long-term investments: Equity securities Enhanced equipment trust certificates (“EETC”) Long-term debt Description Fair Value Methodology Aircraft Type Airbus A350 Boeing 737 MAX Boeing777-300ER Boeing 787 (a) United also has options, purchase and Last nine months of 2018 2019 2020 2021 2022 After 2022 Last nine months of 2018 2019 2020 2021 2022 After 2022 the escrowed funds. These escrowed funds are not guaranteed by United and are not reported as debt on our consolidated balance sheet because the proceeds held by the depositary are not EETC Date Class Final expected February 2018 February 2018 Last nine months of 2018 2019 2020 2021 2022 After 2022 Severance and benefit costs Impairment of assets (Gains) losses on sale of assets and other special charges Special charges Income tax benefit related to special charges Total special charges, net of tax Guam. Balance at December 31, 2017 Accrual Payments Balance at March 31, 2018 Balance at December 31, 2016 Accrual Payments Balance at March 31, 2017 Passenger revenue increased In the three months ended Consolidated traffic increased Operating revenue Operating expense Operating income Nonoperating expense Income tax expense Net income Certain consolidated statistical information for the Company’s operations for the three months ended March 31 is as follows: Passengers (thousands) (a) Revenue passenger miles (“RPMs”) (millions) (b) Available seat miles (“ASMs”) (millions) (c) Passenger load factor (d) Passenger revenue per available seat mile (“PRASM”) (cents) Average yield per revenue passenger mile (“Yield”) (cents) (e) Cost per available seat mile (“CASM”) (cents) Average price per gallon of fuel, including fuel taxes Fuel gallons consumed (millions) Average full-time equivalent employees the three months ended Passenger revenue Cargo Other operating revenue Total operating revenue Increase (decrease) from 2017: Passenger revenue (in millions) Passenger revenue Average fare per passenger Yield PRASM Passengers RPMs (traffic) ASMs (capacity) Passenger load factor (points) 2017, primarily as a result of improved close in demand in the domestic markets and overall demand improvements in the Atlantic markets. Operating Expenses.The table below includes data related to the Salaries and related costs Aircraft fuel Regional capacity purchase Landing fees and other rent Depreciation and amortization Aircraft maintenance materials and outside repairs Distribution expenses Aircraft rent Special charges Other operating expenses Total operating expenses capacity. shipments. Severance and benefit costs Impairment of assets (Gains) losses on sale of assets and other special charges Special charges Interest expense Interest capitalized Interest income Miscellaneous, net Total Aircraft Type Airbus A350 Boeing 737 MAX Boeing777-300ER Boeing 787 (a) United also has options, purchase and financing. * The credit agency does not issue corporate credit ratings for subsidiary entities. Period January 2018 February 2018 March 2018 Total Exhibit No. /s/ /s/ Chris Kenny /s/ /s/ Chris KennyMarch 31,June 30, 2018 Page 3 45 7 United Airlines, Inc.:891012 13 Management’s Management's Discussion and Analysis of Financial Condition and Results of Operations2632 Item 4.33Item 1.34 Item 1A.34 ITEM 1.FINANCIAL STATEMENTS. Three Months Ended
March 31, 2018 2017 (a) $ 8,149 $ 7,653 293 238 590 535 9,032 8,426 2,726 2,636 1,965 1,560 619 536 558 544 541 518 440 454 342 319 127 179 40 51 1,398 1,309 8,756 8,106 276 320 (176) (162) 19 23 17 11 48 (42) (92) (170) 184 150 37 51 $ 147 $ 99 $ 0.52 $ 0.32 Three Months Ended June 30, Six Months Ended June 30, 2018 2017 (a) 2018 2017 (a) Operating revenue: Passenger revenue $ 9,880 $ 9,151 $ 18,030 $ 16,804 Cargo 314 273 607 511 Other operating revenue 583 584 1,172 1,119 Total operating revenue 10,777 10,008 19,809 18,434 Operating expense: Salaries and related costs 2,878 2,842 5,604 5,478 Aircraft fuel 2,390 1,669 4,355 3,229 Regional capacity purchase 681 549 1,300 1,085 Landing fees and other rent 603 541 1,161 1,085 Depreciation and amortization 557 536 1,098 1,054 Aircraft maintenance materials and outside repairs 438 472 878 926 Distribution expenses 393 385 735 704 Aircraft rent 119 152 246 331 Special charges (Note 10) 129 44 169 95 Other operating expenses 1,428 1,381 2,826 2,690 Total operating expenses 9,616 8,571 18,372 16,677 Operating income 1,161 1,437 1,437 1,757 Nonoperating income (expense): Interest expense (177 ) (167 ) (353 ) (329 ) Interest capitalized 14 21 33 44 Interest income 25 13 42 24 Miscellaneous, net (166 ) (27 ) (118 ) (69 ) Total nonoperating expense, net (304 ) (160 ) (396 ) (330 ) Income before income taxes 857 1,277 1,041 1,427 Income tax expense 173 456 210 507 Net income $ 684 $ 821 $ 831 $ 920 Earnings per share, basic $ 2.49 $ 2.67 $ 2.97 $ 2.96 Earnings per share, diluted $ 2.48 $ 2.67 $ 2.96 $ 2.96 andAccountingandAccounting Standards UpdateNo. 2017-07,Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.See Note 1 to the financial statements contained in Part I, Item 1 of this report for additional information. Three Months Ended
March 31, 2018 2017 (a) $ 147 $ 99 30 (8) 3 1 33 (7) $ 180 $ 92 Three Months Ended June 30, Six Months Ended June 30, 2018 2017 (a) 2018 2017 (a) Net income $ 684 $ 821 $ 831 $ 920 Other comprehensive income (loss), net change related to: Employee benefit plans, net of taxes 12 4 42 (4 ) Investments and other, net of taxes — (12 ) 3 (11 ) Total other comprehensive income (loss), net 12 (8 ) 45 (15 ) Total comprehensive income, net $ 696 $ 813 $ 876 $ 905 andAccountingandAccounting Standards UpdateNo. 2017-07,Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.See Note 1 to the financial statements contained in Part I, Item 1 of this report for additional information. March 31, 2018 December 31, 2017 (a) $ 2,404 $ 1,482 2,071 2,316 1,760 1,340 924 924 1,128 1,071 8,287 7,133 29,651 28,692 7,193 6,946 36,844 35,638 (11,538) (11,159) 25,306 24,479 1,025 1,344 1,205 1,151 11 11 1,216 1,162 (808) (777) 408 385 26,739 26,208 4,523 4,523 3,521 3,539 95 91 853 852 8,992 9,005 $ 44,018 $ 42,346 June 30, 2018 December 31, 2017 (a) ASSETS Current assets: Cash and cash equivalents $ 2,884 $ 1,482 Short-term investments 2,187 2,316 Receivables, less allowance for doubtful accounts (2018 — $7; 2017 — $7) 1,840 1,340 Aircraft fuel, spare parts and supplies, less obsolescence allowance (2018 — $380; 2017 — $354) 942 924 Prepaid expenses and other 1,028 1,071 Total current assets 8,881 7,133 Operating property and equipment: Owned— Flight equipment 30,143 28,692 Other property and equipment 7,481 6,946 Total owned property and equipment 37,624 35,638 Less — Accumulated depreciation and amortization (11,974 ) (11,159 ) Total owned property and equipment, net 25,650 24,479 Purchase deposits for flight equipment 894 1,344 Capital leases— Flight equipment 1,224 1,151 Other property and equipment 11 11 Total capital leases 1,235 1,162 Less — Accumulated amortization (833 ) (777 ) Total capital leases, net 402 385 Total operating property and equipment, net 26,946 26,208 Other assets: Goodwill 4,523 4,523 Intangibles, less accumulated amortization (2018 — $1,346; 2017 — $1,313) 3,399 3,539 Restricted cash 94 91 Investments in affiliates and other, net 848 852 Total other assets 8,864 9,005 Total assets $ 44,691 $ 42,346 March 31, 2018 December 31, 2017 (a) $ 5,501 $ 3,940 2,399 2,196 2,221 2,192 1,637 2,166 1,655 1,565 124 128 646 576 14,183 12,763 12,166 11,703 1,019 996 2,716 2,591 1,593 1,602 1,828 1,921 250 204 171 198 1,756 1,634 8,314 8,150 — — 3 3 6,077 6,098 4,684 4,549 (1,314) (769) (1,114) (1,147) 8,336 8,734 $ 44,018 $ 42,346 June 30, 2018 December 31, 2017 (a) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Advance ticket sales $ 5,826 $ 3,940 Accounts payable 2,703 2,196 Frequent flyer deferred revenue 2,206 2,192 Accrued salaries and benefits 1,782 2,166 Current maturities of long-term debt 887 1,565 Current maturities of capital leases 117 128 Other 571 576 Total current liabilities 14,092 12,763 Long-term debt 12,460 11,703 Long-term obligations under capital leases 1,039 996 Other liabilities and deferred credits: Frequent flyer deferred revenue 2,783 2,591 Postretirement benefit liability 1,585 1,602 Pension liability 1,815 1,921 Deferred income taxes 419 204 Lease fair value adjustment, net 155 198 Other 1,704 1,634 Total other liabilities and deferred credits 8,461 8,150 Commitments and contingencies Stockholders' equity: Preferred stock — — Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 273,017,840 and 286,973,195 shares at June 30, 2018 and December 31, 2017, respectively 3 3 Additional capital invested 6,091 6,098 Retained earnings 5,367 4,549 Stock held in treasury, at cost (1,720 ) (769 ) Accumulated other comprehensive loss (1,102 ) (1,147 ) Total stockholders' equity 8,639 8,734 Total liabilities and stockholders' equity $ 44,691 $ 42,346 Three Months Ended
March 31, 2018 2017 $ 1,733 $ 547 (979) (691) (596) (774) 840 810 3 4 2 8 (730) (643) 696 755 (529) (258) (189) (315) (30) (31) (32) (65) (84) 86 919 (10) 1,591 2,303 $ 2,510 $ 2,293 $ 74 $ 711 12 21 $ 2,404 $ 2,164 11 — 95 129 $ 2,510 $ 2,293 Six Months Ended June 30, 2018 2017 Cash Flows from Operating Activities: Net cash provided by operating activities $ 4,175 $ 2,108 Cash Flows from Investing Activities: Capital expenditures (1,734 ) (1,780 ) Purchases of short-term and other investments (1,326 ) (1,587 ) Proceeds from sale of short-term and other investments 1,455 1,561 Investment in affiliates (139 ) — Proceeds from sale of property and equipment 20 5 Other, net 7 123 Net cash used in investing activities (1,717 ) (1,678 ) Cash Flows from Financing Activities: Proceeds from issuance of long-term debt and airport construction financing 1,308 1,139 Repurchases of common stock (969 ) (712 ) Payments of long-term debt (1,294 ) (525 ) Principal payments under capital leases (62 ) (59 ) Other, net (41 ) (75 ) Net cash used in financing activities (1,058 ) (232 ) Net increase in cash, cash equivalents and restricted cash 1,400 198 Cash, cash equivalents and restricted cash at beginning of the period 1,591 2,303 Cash, cash equivalents and restricted cash at end of the period (a) $ 2,991 $ 2,501 Investing and Financing Activities Not Affecting Cash: Property and equipment acquired through the issuance of debt and capital leases $ 139 $ 907 Airport construction financing 12 32 Reconciliation of cash, cash equivalents and restricted cash: Current assets: Cash and cash equivalents $ 2,884 $ 2,371 Restricted cash included in Prepaid expenses and other 13 15 Other assets: Restricted cash 94 115 Total cash, cash equivalents and restricted cash $ 2,991 $ 2,501 Three Months Ended
March 31, 2018 2017 (a) $ 8,149 $ 7,653 293 238 590 535 9,032 8,426 2,726 2,636 1,965 1,560 619 536 558 544 541 518 440 454 342 319 127 179 40 51 1,397 1,309 8,755 8,106 277 320 (176) (162) 19 23 17 11 48 (41) (92) (169) 185 151 38 51 $ 147 $ 100 Three Months Ended June 30, Six Months Ended June 30, 2018 2017 (a) 2018 2017 (a) Operating revenue: Passenger revenue $ 9,880 $ 9,151 $ 18,030 $ 16,804 Cargo 314 273 607 511 Other operating revenue 583 584 1,172 1,119 Total operating revenue 10,777 10,008 19,809 18,434 Operating expense: Salaries and related costs 2,878 2,842 5,604 5,478 Aircraft fuel 2,390 1,669 4,355 3,229 Regional capacity purchase 681 549 1,300 1,085 Landing fees and other rent 603 541 1,161 1,085 Depreciation and amortization 557 536 1,098 1,054 Aircraft maintenance materials and outside repairs 438 472 878 926 Distribution expenses 393 385 735 704 Aircraft rent 119 152 246 331 Special charges (Note 10) 129 44 169 95 Other operating expenses 1,428 1,380 2,825 2,689 Total operating expense 9,616 8,570 18,371 16,676 Operating income 1,161 1,438 1,438 1,758 Nonoperating income (expense): Interest expense (177 ) (167 ) (353 ) (329 ) Interest capitalized 14 21 33 44 Interest income 25 13 42 24 Miscellaneous, net (167 ) (28 ) (119 ) (69 ) Total nonoperating expense, net (305 ) (161 ) (397 ) (330 ) Income before income taxes 856 1,277 1,041 1,428 Income tax expense 172 457 210 508 Net income $ 684 $ 820 $ 831 $ 920 andAccountingandAccounting Standards UpdateNo. 2017-07,Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.See Note 1 to the financial statements contained in Part I, Item 1 of this report for additional information. Three Months Ended
March 31, 2018 2017 (a) $ 147 $ 100 30 (8) 3 1 33 (7) $ 180 $ 93 Three Months Ended June 30, Six Months Ended June 30, 2018 2017 (a) 2018 2017 (a) Net income $ 684 $ 820 $ 831 $ 920 Other comprehensive income (loss), net change related to: Employee benefit plans, net of taxes 12 4 42 (4 ) Investments and other, net of taxes — (12 ) 3 (11 ) Total other comprehensive income (loss), net 12 (8 ) 45 (15 ) Total comprehensive income, net $ 696 $ 812 $ 876 $ 905 andAccountingandAccounting Standards UpdateNo. 2017-07,Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.See Note 1 to the financial statements contained in Part I, Item 1 of this report for additional information. March 31, 2018 December 31, 2017 (a) $ 2,398 $ 1,476 2,071 2,316 1,760 1,340 924 924 1,129 1,071 8,282 7,127 29,651 28,692 7,193 6,946 36,844 35,638 (11,538) (11,159) 25,306 24,479 1,025 1,344 1,205 1,151 11 11 1,216 1,162 (808) (777) 408 385 26,739 26,208 4,523 4,523 3,521 3,539 95 91 853 852 8,992 9,005 $ 44,013 $ 42,340 June 30, 2018 December 31, 2017 (a) ASSETS Current assets: Cash and cash equivalents $ 2,878 $ 1,476 Short-term investments 2,187 2,316 Receivables, less allowance for doubtful accounts (2018 — $7; 2017 — $7) 1,840 1,340 Aircraft fuel, spare parts and supplies, less obsolescence allowance (2018 — $380; 2017 — $354) 942 924 Prepaid expenses and other 1,028 1,071 Total current assets 8,875 7,127 Operating property and equipment: Owned— Flight equipment 30,143 28,692 Other property and equipment 7,481 6,946 Total owned property and equipment 37,624 35,638 Less — Accumulated depreciation and amortization (11,974 ) (11,159 ) Total owned property and equipment, net 25,650 24,479 Purchase deposits for flight equipment 894 1,344 Capital leases— Flight equipment 1,224 1,151 Other property and equipment 11 11 Total capital leases 1,235 1,162 Less — Accumulated amortization (833 ) (777 ) Total capital leases, net 402 385 Total operating property and equipment, net 26,946 26,208 Other assets: Goodwill 4,523 4,523 Intangibles, less accumulated amortization (2018 — $1,346; 2017 — $1,313) 3,399 3,539 Restricted cash 94 91 Investments in affiliates and other, net 848 852 Total other assets 8,864 9,005 Total assets $ 44,685 $ 42,340 March 31, 2018 December 31, 2017 (a) LIABILITIES AND STOCKHOLDER’S EQUITY $ 5,501 $ 3,940 2,399 2,196 2,221 2,192 1,637 2,166 1,655 1,565 124 128 652 581 14,189 12,768 12,166 11,703 1,019 996 2,716 2,591 1,593 1,602 1,828 1,921 277 231 171 198 1,756 1,634 8,341 8,177 — — 1,233 1,787 8,287 8,146 (1,114) (1,147) (108) (90) 8,298 8,696 $ 44,013 $ 42,340 June 30, 2018 December 31, 2017 (a) LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Advance ticket sales $ 5,826 $ 3,940 Accounts payable 2,703 2,196 Frequent flyer deferred revenue 2,206 2,192 Accrued salaries and benefits 1,782 2,166 Current maturities of long-term debt 887 1,565 Current maturities of capital leases 117 128 Other 575 581 Total current liabilities 14,096 12,768 Long-term debt 12,460 11,703 Long-term obligations under capital leases 1,039 996 Other liabilities and deferred credits: Frequent flyer deferred revenue 2,783 2,591 Postretirement benefit liability 1,585 1,602 Pension liability 1,815 1,921 Deferred income taxes 446 231 Lease fair value adjustment, net 155 198 Other 1,704 1,634 Total other liabilities and deferred credits 8,488 8,177 Commitments and contingencies Stockholder's equity: Common stock at par, $0.01 par value; authorized 1,000 shares; issued and outstanding 1,000 shares at both June 30, 2018 and December 31, 2017 — — Additional capital invested 841 1,787 Retained earnings 8,971 8,146 Accumulated other comprehensive loss (1,102 ) (1,147 ) Receivable from related parties (108 ) (90 ) Total stockholder's equity 8,602 8,696 Total liabilities and stockholder's equity $ 44,685 $ 42,340 Three Months Ended
March 31, 2018 2017 $ 1,717 $ 535 (979) (691) (596) (774) 840 810 3 4 2 8 (730) (643) 696 755 (529) (258) (189) (315) (30) (31) (16) (53) (68) 98 919 (10) 1,585 2,297 $ 2,504 $ 2,287 $ 74 $ 711 12 21 $ 2,398 $ 2,158 11 — 95 129 $ 2,504 $ 2,287 Six Months Ended June 30, 2018 2017 Cash Flows from Operating Activities: Net cash provided by operating activities $ 4,158 $ 2,095 Cash Flows from Investing Activities: Capital expenditures (1,734 ) (1,780 ) Purchases of short-term investments and other investments (1,326 ) (1,587 ) Proceeds from sale of short-term and other investments 1,455 1,561 Investment in affiliates (139 ) — Proceeds from sale of property and equipment 20 5 Other, net 7 123 Net cash used in investing activities (1,717 ) (1,678 ) Cash Flows from Financing Activities: Proceeds from issuance of long-term debt and airport construction financing 1,308 1,139 Dividend to UAL (969 ) (712 ) Payments of long-term debt (1,294 ) (525 ) Principal payments under capital leases (62 ) (59 ) Other, net (24 ) (62 ) Net cash used in financing activities (1,041 ) (219 ) Net increase in cash, cash equivalents and restricted cash 1,400 198 Cash, cash equivalents and restricted cash at beginning of the period 1,585 2,297 Cash, cash equivalents and restricted cash at end of the period (a) $ 2,985 $ 2,495 Investing and Financing Activities Not Affecting Cash: Property and equipment acquired through the issuance of debt and capital leases $ 139 $ 907 Airport construction financing 12 32 Reconciliation of cash, cash equivalents and restricted cash: Current assets: Cash and cash equivalents $ 2,878 $ 2,365 Restricted cash included in Prepaid expenses and other 13 15 Other assets: Restricted cash 94 115 Total cash, cash equivalents and restricted cash $ 2,985 $ 2,495 “UAL”"UAL" or the “Company”"Company") is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”"United"). This Quarterly Report on Form10-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’sUnited's operating revenues and operating expenses comprise nearly 100% of UAL’sUAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL’sUAL'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,”"we," "our," "us," and the “Company”"Company" in this report for disclosures that relate to all of UAL and United.“SEC”"SEC"). Some information and footnote disclosures normally included in financial statements that comply with accounting principles generally accepted in the United States (“GAAP”("GAAP") have been condensed or omitted as permitted by the SEC. The financial statements include all adjustments, including normal recurring adjustments and other adjustments, which are considered necessary for a fair presentation of the Company’sCompany's financial position and results of operations. The UAL and United financial statements should be read together with the information included in the Company’sCompany's Annual Report on Form10-K for the year ended December 31, 2017.2017. The Company’sCompany's quarterly financial data is subject to seasonal fluctuations and historically its second and third quarter financial results, which reflect higher travel demand, are better than its first and fourth quarter financial results.FASBFinancial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 606,Revenue from Contracts with Customers (the “New"New Revenue Standard”Standard"), effective January 1, 2018 using the full-retrospective method. Topic 606 prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For the Company, the most significant impact of the standard is the reclassification of certain ancillary fees from other operating revenue into passenger revenue on the statement of consolidated operations. These ancillary fees are directly related to passenger travel, such as ticket change fees and baggage fees, and are no longer considered distinct performance obligations separate from the passenger travel component. In addition, the ticket change fees, which were previously recognized when received, are now recognized when transportation is provided. Adoption of the standard had no impact on the Company’sCompany's consolidated cash flows statements.“New"New Retirement Standard”Standard"), effective January 1, 2018 using the full-retrospective method. The New Retirement Standard requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income. The Company elected to apply the practical expedient and use the amounts disclosed in Note 5 to the financial statements included in Part I, Item 1 of the Company’sCompany's Quarterly Report on Form10-Q for the quarterly period ended March 31,June 30, 2017 as the estimation basis for applying the retrospective presentation requirements of the standard.first quarter ofthree months ended June 30, 2017 (in millions, except per share amounts): Three Months Ended March 31, 2017 As
Previously
Reported New
Revenue
Standard
Adjustments New
Retirement
Standard
Adjustments As
Adjusted $ 7,174 $ 479 $ — $ 7,653 220 18 — 238 1,026 (491) — 535 8,420 6 — 8,426 2,661 — (25) 2,636 307 12 — 319 1,332 (23) — 1,309 8,142 (11) (25) 8,106 278 17 25 320 (150) (12) — (162) (17) — (25) (42) (133) (12) (25) (170) 145 5 — 150 49 2 — 51 96 3 — 99 0.31 0.01 — 0.32 Three Months Ended June 30, 2017 As Previously Reported As Adjusted Passenger revenue $ 8,622 $ 529 $ — $ 9,151 Cargo 254 19 — 273 Other operating revenue 1,124 (540 ) — 584 Total operating revenue 10,000 8 — 10,008 Salaries and related costs 2,868 — (26 ) 2,842 Distribution expenses 362 23 — 385 Other operating expenses 1,408 (27 ) — 1,381 Total operating expenses 8,601 (4 ) (26 ) 8,571 Operating income 1,399 12 26 1,437 Interest expense (158 ) (9 ) — (167 ) Miscellaneous, net (1 ) — (26 ) (27 ) Total nonoperating expense, net (125 ) (9 ) (26 ) (160 ) Income before income taxes 1,274 3 — 1,277 Income tax expense 456 — — 456 Net income 818 3 — 821 Earnings per share, basic 2.67 — — 2.67 Earnings per share, diluted 2.66 0.01 — 2.67 Six Months Ended June 30, 2017 As Previously Reported As Adjusted Passenger revenue $ 15,796 $ 1,008 $ — $ 16,804 Cargo 474 37 — 511 Other operating revenue 2,150 (1,031 ) — 1,119 Total operating revenue 18,420 14 — 18,434 Salaries and related costs 5,529 — (51 ) 5,478 Distribution expenses 669 35 — 704 Other operating expenses 2,740 (50 ) — 2,690 Total operating expenses 16,743 (15 ) (51 ) 16,677 Operating income 1,677 29 51 1,757 Interest expense (308 ) (21 ) — (329 ) Miscellaneous, net (18 ) — (51 ) (69 ) Total nonoperating expense, net (258 ) (21 ) (51 ) (330 ) Income before income taxes 1,419 8 — 1,427 Income tax expense 505 2 — 507 Net income 914 6 — 920 Earnings per share, basic 2.95 0.01 — 2.96 Earnings per share, diluted 2.94 0.02 — 2.96 UAL’sUAL's balance sheet accounts and captions as of December 31, 2017 (in millions): At December 31, 2017 As
Previously
Reported New Revenue
Standard
Adjustments As
Adjusted $ 1,051 $ 20 $ 1,071 7,113 20 7,133 42,326 20 42,346 3,876 64 3,940 2,176 16 2,192 569 7 576 12,676 87 12,763 2,565 26 2,591 225 (21) 204 8,145 5 8,150 4,621 (72) 4,549 8,806 (72) 8,734 42,326 20 42,346 At December 31, 2017 As Previously Reported As Adjusted Prepaid expenses and other $ 1,051 $ 20 $ 1,071 Total current assets 7,113 20 7,133 Total assets 42,326 20 42,346 Advance ticket sales 3,876 64 3,940 Frequent flyer deferred revenue 2,176 16 2,192 Other 569 7 576 Total current liabilities 12,676 87 12,763 Frequent flyer deferred revenue - long-term 2,565 26 2,591 Deferred income taxes 225 (21 ) 204 Total other liabilities and deferred credits 8,145 5 8,150 Retained earnings 4,621 (72 ) 4,549 Total stockholders' equity 8,806 (72 ) 8,734 Total liabilities and stockholders' equity 42,326 20 42,346 (Subtopic(Subtopic 825-10) (“ASU2016-01”) effective January 1, 2018. This standard makes several changes, including the elimination of theavailable-for-sale classification of equity investments, and requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in earnings. The adoption did not have a material impactCompany reclassified to retained earnings $7 million of unrealized loss on our financial statements.the Company's investment in Azul, S.A. ("Azul") which was previously classified as an available-for-sale security. See NoteNotes 4 and 7 to the financial statements included in this Part I, Item 1 for additional information.(the “New Lease Standard”). The guidance requires lessees to recognize aright-of-use asset and a lease liability for all leases (with the exception of short-term leases) at the commencement date and recognize expenses on their income statements similar to the current Topic 840,Leases. ItThe new lease standard is effective for fiscal years and interim periods beginning after December 15, 2018, and early adoption is permitted. Lessees and lessors are required to adopt the New Lease Standardnew lease standard using a modified retrospective approach for all leases existing at or commencing after the date of initial application with an option to use certain practical expedients. We have not completedfinalized our evaluation of the impactassessment but believe this standard will have a significant impact on our consolidated balance sheets butsheets. The standard is not expected to have a material impact on the Company’sCompany's results of operations or cash flows.The primary effect of adopting the new standard will be to record assets and obligations for itsour operating leases.non-refundablenonrefundable expired tickets and other facts, such as recent aging trends, program changes and modifications that could affect the ultimate expiration patterns of tickets. Fees charged in association with changes or extensionsto non-refundable tickets are considered part of the Company’sCompany's passenger travel obligation. As such, those fees are deferred at the time of collection and recognized at the time the travel is provided.Company’sCompany's ticket sales through a fee included in ticket prices. The Company collects these fees and remits them to the appropriate government agency. These fees are recorded on a net basis and, as a result, are excluded from revenue.March 31,June 30, 2018 and 2017.Company’sCompany's liability to provide air transportation in the future. In both the three and six months ended March 31,June 30, 2018, the Company recognized approximately $2.7 billion and $2.2 billion, respectively, and in the three and six months ended June 30, 2017, the Company recognized approximately $1.9$2.6 billion and $2.2 billion respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods. All tickets sold at any given point of time have travel dates extending up to twelve months. As a result, the balance of the Company’sCompany's Advance ticket sales liability represents activity that will be recognized in the next twelve months. United’s United's MileagePlus program builds customer loyalty by offering awards, benefits and services to program participants. Members in this program earn miles for travel on United, United Express, Star Alliance members and certain other airlines that participate in the program. Members can also earn miles by purchasing the goods and services of our networkof non-airline partners. We have contracts to sell miles to these partners with the terms extending from one to eight years. These partners include domestic and international credit card issuers, retail merchants, hotels, car rental companies and our participating airline partners. Miles can be redeemed for free (other than taxes and government imposed fees), discounted or upgraded air traveland non-travel awards. Miles expire after 18 months of member account inactivity.Company’sCompany's consolidated balance sheet and subsequently recognizes it into revenue when miles are redeemed for air travel andnon-travel non-air travel awards.Company’sCompany's estimated selling price of miles is based on an equivalent ticket value less breakage, which incorporates the expected redemption of miles, as the best estimate of selling price for these miles. The equivalent ticket value is based on the prior 12 months’months' weighted average equivalent ticket value of similar fares as those used to settle award redemptions while taking into consideration such factors as redemption pattern, cabin class, loyalty status and geographic region. The estimated selling price of miles is adjusted by breakage that considers a number of factors, including redemption patterns of various customer groups. The Company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns. The Company’sCompany's estimate of the expected expiration of miles requires significant management judgment. Current and future changes to expiration assumptions or to the expiration policy, or to program rules and program redemption opportunities, may result in material changes to the deferred revenue balance as well as recognized revenues from the program. Agreement. United has a significant contract to sell MileagePlus miles to itsco-branded credit card partner Chase Bank USA, N.A. (“Chase”("Chase"). Chase awards miles to MileagePlus members based on their credit card activity. United identified the following significant separately identifiable performance obligations in theco-brand agreement:United’sUnited's performance obligation is to provide Chase access to its customer list and the use of its brand. United determined access to its customer list and use of the United brand constitute a single performance obligation by virtue of being highly interdependent and interrelated. Marketing revenue is recorded to Other operating revenue over the term of theco-brand agreement based on customer’scustomers' use of the MileagePlus credit card.United’sUnited's website, email promotions, direct mail campaigns, airport advertising andin-flight advertising. Advertising revenue is recorded to Other operating revenue as advertising is provided.United’sUnited's performance obligations are comprised of various items such as waived bag fees, seat upgrades, and lounge passes. Lounge passes are recorded to Other operating revenue as customers use the lounge passes. Bag fees and seat upgrades are recorded to Passenger revenue at the time of the associated travel.management’smanagement's estimated selling price of each component. The objective of using the estimated selling price based methodology is to determine the price at which wemembers’members' accounts are combined into one homogeneous pool and are thus not separately identifiable, for award redemption purposes, between miles earned in the current period and those in their beginning balance. TheOf the miles expected to be redeemed, the Company expects the majority of these miles to be redeemed within the first four years with the highest redemption rate in year one.two years. The table below presents a roll forward of Frequent flyer deferred revenue (in millions): Three Months Ended
March 31, 2018 2017 $ 4,783 $ 4,889 603 488 (409) (398) (40) (39) $ 4,937 $ 4,940 Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Total Frequent flyer deferred revenue - beginning balance $ 4,937 $ 4,940 $ 4,783 $ 4,889 Total miles awarded 607 531 1,210 1,019 Travel miles redeemed (Passenger revenue) (519 ) (535 ) (928 ) (933 ) Non-travel miles redeemed (Other operating revenue) (36 ) (45 ) (76 ) (84 ) Total Frequent flyer deferred revenue - ending balance $ 4,989 $ 4,891 $ 4,989 $ 4,891 March 31,June 30, 2018, and 2017, the Company recognized, in Other operating revenue, $482$480 million and $403$974 million, respectively, related to the marketing, advertising, non-travel miles redeemed (net of related costs) and other travel-related benefits of the mileage revenue associated with our various partner agreements including, but not limited to, our Chaseco-brand agreement. The portion related to the MileagePlus miles awarded of the total amounts received is deferred and presented in the table above as an increase to the frequent flyer liability. The Company also recognized in Other operating revenue, $28$459 million in costs associated with thenon-travel miles redeemedand $873 million, respectively, in the three and six months ended March 31, 2018 and 2017.March 31June 30 (in millions): 2018 2017 $ 3,485 $ 3,272 1,483 1,379 4,968 4,651 1,252 1,117 1,069 1,053 860 832 3,181 3,002 $ 8,149 $ 7,653 6,616 6,227 1,533 1,426 $ 8,149 $ 7,653 Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Mainline $ 4,395 $ 4,043 $ 7,881 $ 7,315 Regional 1,786 1,615 3,269 2,994 Domestic 6,181 5,658 11,150 10,309 Atlantic 1,824 1,615 3,076 2,732 Pacific 1,103 1,064 2,172 2,117 Latin America 772 814 1,632 1,646 International 3,699 3,493 6,880 6,495 Consolidated $ 9,880 $ 9,151 $ 18,030 $ 16,804 Mainline 8,045 7,492 14,661 13,719 Regional 1,835 1,659 3,369 3,085 Consolidated $ 9,880 $ 9,151 $ 18,030 $ 16,804 passengers’passengers' travel, such as ticket change fees, baggage fees, inflight amenities fees, and other ticket-related fees. These ancillary fees are part of the travel performance obligation and, as such, are recognized as passenger revenue when the travel occurs. The Company recorded $497$555 million and $478$1,052 million of ancillary fees within passenger revenue in the first three and six monthsof 2018 andended June 30, 2017, respectively.UAL’sUAL's basic and diluted earnings per share are set forth below (in millions, except per share amounts): Three Months Ended
March 31, 2018 2017 Earnings available to common stockholders $ 147 $ 99 Basic weighted-average shares outstanding 283.9 313.7 1.0 0.9 Diluted weighted-average shares outstanding 284.9 314.6 Earnings per share, basic and diluted $ 0.52 $ 0.32 Three Months Ended
June 30, Six Months Ended
June 30, 2018 2017 2018 2017 Earnings available to common stockholders $ 684 $ 821 $ 831 $ 920 Basic weighted-average shares outstanding 274.7 306.9 279.3 310.3 Effect of employee stock awards 0.9 0.8 0.9 0.8 Diluted weighted-average shares outstanding 275.6 307.7 280.2 311.1 Earnings per share, basic $ 2.49 $ 2.67 $ 2.97 $ 2.96 Earnings per share, diluted $ 2.48 $ 2.67 $ 2.96 $ 2.96 antidilutivepotentially dilutive securities excluded from the computation of diluted earnings per share amounts was not material.March 31,June 30, 2018, UAL repurchased approximately 8.45.9 million and 14.3 million shares, respectively, of UAL common stock in open market transactions for $0.6 billion.$0.4 billion and $1.0 billion, respectively. As of March 31,June 30, 2018, the Company had approximately $2.4$2.0 billion remaining to purchase shares under its share repurchase program. UAL may repurchase shares through the open market, privately negotiated transactions, block trades or accelerated share repurchase transactions from time to time in accordance with applicable securities laws. UAL will repurchase shares of UAL common stock subject to prevailing market conditions, and may discontinue such repurchases at any time. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this report for additional information.Company’sCompany's accumulated other comprehensive income (loss), net of tax (“AOCI”("AOCI") (in millions):UAL Pension and
Other
Postretirement
Liabilities Investments and
Other Income Taxes Total $ (1,102) $ (6) $ (39) $ (1,147) 23 (4) (6) 13 16 — (3) 13 — 7 — 7 39 3 (9) 33 $ (1,063) $ (3) $ (48) $ (1,114) Balance at December 31, 2016 $ (854) $ (1) $ 26 $ (829) (26) — 10 (16) 13 2 (6) 9 (13) 2 4 (7) Balance at March 31, 2017 $ (867) $ 1 $ 30 $ (836) (a) This amount represents the unrealized loss on the Company’s investment in Azul, S.A. (“Azul”) which was previously classified as anavailable-for-sale security. Three Months Ended
March 31, Affected Line Item
in the Statements of
Consolidated Operations 2018 2017 $ 16 $ 13 Miscellaneous, net — 2 Aircraft fuel UAL Pension and Other Postretirement Liabilities Investments and Other Income Taxes Total Balance at March 31, 2018 $ (1,063 ) $ (3 ) $ (48 ) $ (1,114 ) Changes in value 1 1 — 2 Amounts reclassified to earnings 14 — (4 ) 10 Net change 15 1 (4 ) 12 Balance at June 30, 2018 $ (1,048 ) $ (2 ) $ (52 ) $ (1,102 ) Balance at December 31, 2017 $ (1,102 ) $ (6 ) $ (39 ) $ (1,147 ) Changes in value 24 (3 ) (6 ) 15 Amounts reclassified to earnings 30 — (7 ) 23 Amounts reclassified to retained earnings — 7 — 7 Net change 54 4 (13 ) 45 Balance at June 30, 2018 $ (1,048 ) $ (2 ) $ (52 ) $ (1,102 ) Balance at March 31, 2017 $ (867 ) $ 1 $ 30 $ (836 ) Changes in value (7 ) (17 ) 8 (16 ) Amounts reclassified to earnings 14 — (6 ) 8 Net change 7 (17 ) 2 (8 ) Balance at June 30, 2017 $ (860 ) $ (16 ) $ 32 $ (844 ) Balance at December 31, 2016 $ (854 ) $ (1 ) $ 26 $ (829 ) Changes in value (33 ) (17 ) 18 (32 ) Amounts reclassified to earnings 27 2 (12 ) 17 Net change (6 ) (15 ) 6 (15 ) Balance at June 30, 2017 $ (860 ) $ (16 ) $ 32 $ (844 ) Details for AOCI Components Reclassified to Income Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Pension and other postretirement liabilities $ 14 $ 14 $ 30 $ 27 Miscellaneous, net Investments and Other Reclassifications of losses into earnings related to fuel derivative contracts — — — 2 Aircraft fuel 56 to the financial statements included in this Part I, Item 1 for additional information).Company’sCompany's effective tax rate for the three and six months ended March 31,June 30, 2018 was 20.2%, and the effective tax rate for the three and six months ended June 30, 2017 was 20.3%35.7% and 33.6%35.5%, respectively. The effective tax rate represents a blend of federal, state and foreign taxes and included the impact of certain nondeductible items. The effective tax rate for the three and six months ended March 31,June 30, 2018 also reflects the reduced federal corporate income tax rate as a result of the enactment of the Tax Cuts and Jobs Act (the “Tax Act”"Tax Act") in December 2017 and the impact of a change in the Company’sCompany's mix of domestic and foreign earnings. We continue to analyze the different aspects of the Tax Act which could potentially affect the provisional estimates that were recorded at December 31, 2017.Company’sCompany's net periodic benefit cost includes the following components for the three months ended March 31June 30 (in millions): Pension Benefits Other
Postretirement
Benefits Affected Line Item
in the Statements of
Consolidated Operations 2018 2017 2018 2017 Service cost $ 57 $ 49 $ 3 $ 2 Salaries and related costs 54 55 15 17 Miscellaneous, net Expected return on plan assets (73) (60) — — Miscellaneous, net Amortization of unrecognized (gain) loss and prior service cost (credit) 33 31 (17) (18) Miscellaneous, net Settlement loss — 1 — — Miscellaneous, net $ 71 $ 76 $ 1 $ 1 Pension Benefits Other Postretirement Benefits Affected Line Item
in the Statements of
Consolidated Operations 2018 2017 2018 2017 Service cost $ 57 $ 49 $ 3 $ 4 Salaries and related costs Interest cost 54 55 15 17 Miscellaneous, net Expected return on plan assets (73 ) (61 ) — (1 ) Miscellaneous, net Amortization of unrecognized (gain) loss and prior service cost (credit) 32 32 (18 ) (18 ) Miscellaneous, net Settlement loss — 1 — — Miscellaneous, net Total $ 70 $ 76 $ — $ 2 Pension Benefits Other Postretirement Benefits Affected Line Item
in the Statements of
Consolidated Operations 2018 2017 2018 2017 Service cost $ 114 $ 98 $ 6 $ 6 Salaries and related costs Interest cost 108 110 30 34 Miscellaneous, net Expected return on plan assets (146 ) (121 ) — (1 ) Miscellaneous, net Amortization of unrecognized (gain) loss and prior service cost (credit) 65 63 (35 ) (36 ) Miscellaneous, net Settlement loss — 2 — — Miscellaneous, net Total $ 141 $ 152 $ 1 $ 3 March 31,June 30, 2018, the Company contributed $113$47 million and $160 million to its U.S. domestictax-qualified defined benefit pension plans.threesix months ended March 31,June 30, 2018, UAL granted share-based compensation awards pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan. These share-based compensation awards include 1.71.8 million RSUs consisting of 1.01.1 million time-vested RSUs and 0.7 million performance-based RSUs. The time-vested RSUs vestpro-rata, on February 28th of each year, over a three-year period from the date of grant. These RSUs are generally equity awards settled in stock for domestic employees and liability awards settled in cash for international employees. The cash payments are based on the20-day average closing price of UAL common stock immediately prior to the vesting date. The performance-based RSUs vest based on the Company’sCompany's relative improvement inpre-tax margin, as compared to a group of industry peers, for the three years ending December 31, 2020. If this performance condition is achieved, cash payments will be made after the end of the performance period based on the20-day average closing price of UAL common stock immediately prior to the vesting date. The Company accounts for the performance-based RSUs as liability awards. Three Months Ended
March 31, 2018 2017 $ 17 $ 23 March 31,
2018 December 31,
2017 $ 102 $ 53 Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Share-based compensation expense $ 27 $ 33 $ 44 $ 56 June 30, 2018 December 31, 2017 Unrecognized share-based compensation $ 86 $ 53 UAL’sUAL's financial statements (in millions): March 31, 2018 December 31, 2017 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 $ 2,404 $ 2,404 $ — $ — $ 1,482 $ 1,482 $ — $ — 945 — 945 — 958 — 958 — 606 — 606 — 753 — 753 — 110 — 110 — 113 — 113 — 53 — 53 — 120 — 120 — 172 — 172 — 188 — 188 — 185 — — — 184 — — — Restricted cash 106 106 — — 109 109 — — 144 144 — — 99 99 — — 19 — — 19 22 — — 22 June 30, 2018 December 31, 2017 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 2,884 $ 2,884 $ — $ — $ 1,482 $ 1,482 $ — $ — Short-term investments: Corporate debt 958 — 958 — 958 — 958 — Asset-backed securities 722 — 722 — 753 — 753 — U.S. government and agency notes 102 — 102 — 113 — 113 — Certificates of deposit placed through an account registry service ("CDARS") 49 — 49 — 120 — 120 — Other fixed-income securities 170 — 170 — 188 — 188 — Other investments measured at net asset value ("NAV") 186 — — — 184 — — — Restricted cash 107 107 — — 109 109 — — Long-term investments: Equity securities 147 147 — — 99 99 — — Enhanced equipment trust certificates ("EETC") 19 — — 19 22 — — 22 March 31,June 30, 2018, asset-backed securities have remaining maturities of less than one year to approximately 1716 years, corporate debt securities have remaining maturities of less than one year to approximately three years and CDARS have maturities of less than one year. U.S. government and other securities have maturities of less than one year to approximately three13 years. The EETC securities mature in 2019.workers’workers' compensation.United’sUnited's investment in Azul. In April 2018, through a wholly-owned subsidiary, the Company invested $138 million in Azul thus increasing its preferred equity stake to approximately 8% (approximately 2% of the total capital stock of Azul). The Company recognizes changes in Azul’sto the fair market value of its equity investment in Azul in Miscellaneous, net in its statements of consolidated operations. Fair Value of Debt by Fair Value Hierarchy Level March 31, 2018 December 31, 2017 Carrying
Amount Fair Value Carrying
Amount Fair Value Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 $ 13,821 $ 14,068 $ — $ 10,377 $ 3,691 $ 13,268 $ 13,787 $ — $ 10,115 $ 3,672 Fair Value of Debt by Fair Value Hierarchy Level June 30, 2018 December 31, 2017 Carrying Amount Fair Value Carrying Amount Fair Value Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Long-term debt $ 13,347 $ 13,443 $ — $ 9,879 $ 3,564 $ 13,268 $ 13,787 $ — $ 10,115 $ 3,672 Cash and cash equivalents The carrying amounts approximate fair value because of the short-term maturity of these assets. Fair value is based on (a) the trading prices of the investment or similar instruments, (b) an income approach, which uses valuation techniques to convert future amounts into a single present amount based on current market expectations about those future amounts when observable trading prices are not available, or (c) broker quotes obtained by third-party valuation services. Other investments measured at NAV In accordance with the relevant accounting standards, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position. The investments measured using NAV are shares of mutual funds that invest in fixed-income instruments including bonds, debt securities, and other similar instruments issued by various U.S. andnon-U.S. public- or private-sector entities. The Company can redeem its shares at any time at NAV subject to athree-day settlement period. Long-term debt Fair values were based on either market prices or the discounted amount of future cash flows using our current incremental rate of borrowing for similar liabilities. Commitments.As of March 31,June 30, 2018, United had firm commitments and options to purchase aircraft from The Boeing Company (“Boeing”("Boeing") and Airbus S.A.S. (“Airbus”("Airbus") presented in the table below: Number of Firm
Commitments (a) 45 155 161 1 2 18 14purchaseother rights for additional aircraft.Company’sCompany's future capital commitments could change. For the remainder of 2018, Unitedthe Company expects to take delivery of two Boeing777-300ER aircraft, three Boeing 787 aircraft, 10four Boeing 737 MAX aircraft, one Boeing 777-300ER aircraft and three usedBoeing 767-300ER aircraft. In MarchJuly 2018, United entered into an agreement to purchase 25 new Embraer E175 aircraft with expected delivery dates scheduled in 2019. United also has an agreement to purchase 20 used Airbus A319 aircraft with expected delivery dates scheduled in 2020 and 2021.United’sUnited's commitments as of March 31,June 30, 2018, which primarily relate to the acquisition of aircraft and related spare engines, aircraft improvements and include other capital purchase commitments. Any new firm aircraft orders, including through the exercise of purchase options and purchase rights, will increase the total future capital commitments of the Company. (in billions) $ 2.4 3.7 2.0 2.7 1.8 9.8 $ 22.4 (in billions) Last six months of 2018 $ 1.7 2019 3.3 2020 3.0 2021 2.8 2022 1.8 After 2022 9.8 $ 22.4 executedentered into a new Airline Use and Lease Agreement at O’HareChicago O'Hare International Airport ("Chicago O'Hare") with the City of Chicago with a lease term of approximately 15 years, effective May 12, 2018 through December 31, 2033. In the second quarter of 2018, United entered into several new ground and facility leases at Chicago O'Hare, effective May 12, 2018, for hangars, a ground equipment maintenance building, and employee parking with lease terms ranging from 15 years to 30 years.Company’sCompany's scheduled future minimum lease payments under facility operating leases having initial or remaining noncancelable lease terms of more than one year as of March 31,June 30, 2018 (in millions): Facility and Other
Operating Leases $ 1,010 1,209 1,302 1,068 930 7,576 $ 13,095 Facility and Other Operating Leases Last six months of 2018 $ 689 2019 1,244 2020 1,338 2021 1,104 2022 966 After 2022 7,934 $ 13,275 March 31,June 30, 2018, United is the guarantor of approximately $2.0 billion in aggregate principal amount oftax-exempt special facilities revenue bonds and interest thereon. These bonds, issued by various airport municipalities, are payable solely from rentals paid under long-term agreements with the respective governing bodies. The leasing arrangements associated with approximately $1.4 billion of these obligations are accounted for as operating leases with the associated expense recorded on a straight-line basis resulting in ratable accrual of the lease obligation over the expected lease term. The leasing arrangements associated with approximately $454 million of these obligations are accounted for as capital leases. All of these bonds are due between 2019 and 2038.Company’sCompany's financing transactions that include loans, the Company typically agrees to reimburse lenders for any reduced returns with respect to the loans due to any change in capital requirements and, in the case of loans in which the interest rate is based on the London Interbank Offered Rate, for certain other increased costs that the lenders incur in carrying these loans as a result of any change in law, subject, in most cases, to obligations of the lenders to take certain limited steps to mitigate the requirement for, or the amount of, such increased costs. At March 31,June 30, 2018, the Company had $3.4$3.3 billion of floating rate debt and $52$44 million of fixed rate debt with remaining terms of up to 11 years that are subject to these increased cost provisions. In several financing transactions involving loans or leases fromnon-U.S. entities, with remaining terms of up to 11 years and an aggregate balance of $3.3$3.2 billion, the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder tonon-U.S. entities to withholding taxes, subject to customary exclusions.March 31, 2018, United is the guarantor of $154 million of aircraft mortgage debt issued by one of United’s regional carriers. The aircraft mortgage debt is subject to similar increased cost provisions as described above for the Company’s debt, and the Company would potentially be responsible for those costs under the guarantees.Labor Negotiations. As of March 31,June 30, 2018, United had approximately 90,80091,400 employees, of whom approximately 79%80% were represented by various U.S. labor organizations. UNITE HERE is attempting to organize United’sUnited's Catering Operations employees, who are currently unrepresented, and filed an application to do so with the National Mediation Board on January 24, 2018.March 31,June 30, 2018, a substantial portion of the Company’sCompany's assets, principally aircraft, certain route authorities and airport slots, and loyalty program intangible assets, was pledged under various loan and other agreements. As of March 31,June 30, 2018, UAL and United were in compliance with their respective debt covenants. In May 2018, the Company's Amended and Restated Credit and Guaranty Agreement (as amended, the "2017 Credit Agreement") was amended to reduce the interest rate on the term loan by 0.25%. As of March 31,June 30, 2018, United had its entire capacity of $2.0 billion available under the revolving credit facility of the Company’s Amended2017 Credit Agreement.Restated Credit and Guaranty Agreement (as amended, the “2017 Credit Agreement”).EETCs. In FebruaryMay 2018, United created twothree new EETC pass-through trusts, each of which issued pass-through certificates. The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes issued by United and secured by its aircraft. The Company records the debt obligation upon issuance of the equipment notes rather than upon the initial issuance of the pass-through certificates. The pass-through certificates represent fractional undivided interests in the respective pass-through trusts and are not obligations of United. The payment obligations under the equipment notes are those of United. Proceeds received from the sale of pass-through certificates are initially held by a depositary in escrow for the benefit of the certificate holders until United issues equipment notes to the trust, which purchases such notes with a portion ofUnited’sUnited's assets. Certain details of the pass-through trusts with proceeds received from issuance of debt in 2018 are as follows (in millions, except stated interest rate): Principal
distribution date Stated
interest
rate Total proceeds received
from issuance of debt
during 2018 and
recorded as debt as of
March 31, 2018 Remaining
proceeds from
issuance of debt
to be received in
future periods AA $ 677 March 2030 3.50% $ 476 $ 201 A 258 March 2030 3.70% 181 77 $ 935 $ 657 $ 278 EETC Date Class Principal Final expected distribution date Stated interest rate February 2018 AA $ 677 March 2030 3.50% $ 677 February 2018 A 258 March 2030 3.70% 258 May 2018 B 226 March 2026 4.60% 226 $ 1,161 $ 1,161 Company’sCompany's contractual principal payments (not including debt discount or debt issuance costs) at March 31,June 30, 2018 under then-outstanding long-term debt agreements (in millions): $ 1,380 1,218 1,207 1,194 1,529 7,457 $ 13,985 Last six months of 2018 $ 394 2019 1,244 2020 1,242 2021 1,230 2022 1,565 After 2022 7,838 $ 13,513 March 31,June 30, special charges consisted of the following (in millions): Three Months Ended
March 31, Operating: 2018 2017 $ 14 $ 37 23 — 3 14 40 51 (9) (18) $ 31 $ 33 Three Months Ended
June 30, Six Months Ended
June 30,Operating: 2018 2017 2018 2017 Impairment of assets $ 111 $ — $ 134 $ — Severance and benefit costs 11 41 25 78 (Gains) losses on sale of assets and other special charges 7 3 10 17 Special charges 129 44 169 95 Income tax benefit related to special charges (29 ) (16 ) (38 ) (34 ) Total special charges, net of tax $ 100 $ 28 $ 131 $ 61 March 31,June 30, 2018, and 2017, the Company recorded severance and benefit costs related to a voluntaryearly-out program for its technicians and related employees represented by the International Brotherhood of Teamsters (the “IBT”) of $8$6 million ($74 million net of taxes) and $21$14 million ($1411 million net of taxes), respectively. In the first quarter of 2017, approximately 1,000 technicians and related employees elected to voluntarily separate from the Company and will receive a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through early 2019.2018. Also during the three and six months ended March 31,June 30, 2018, and 2017, the Company recorded other management severance primarily related to its management reorganization initiative of $6$5 million ($4 million net of taxes) and $16$11 million ($108 million net of taxes), respectively.March 31,June 30, 2017, the Company recorded $36 million ($23 million net of taxes) and $57 million ($37 million net of taxes), respectively, of severance and benefit costs related to the voluntary early-out program for its technicians and related employees, and $5 million ($3 million net of taxes) and $21 million ($13 million net of taxes), respectively, of management severance.a $23$7 million ($175 million net of taxes) fair value adjustment forand $10 million ($8 million net of taxes), respectively, of other special charges related primarily to contract termination of regional aircraft purchased off lease and impairments related to certain fleet types and certain international slots no longeroperations in use.March 31,June 30, 2018 is primarily related to severance and other compensation expense associated with voluntary employee early retirement programs and is expected to be mostly paid through early 2019.in the second half of 2018. The accrual balance for future lease payments on permanently grounded aircraft as of March 31,June 30, 2018 is expected to be mostly paid through 2025. Activity related to these accruals is as follows (in millions): Severance and
Benefits Permanently
Grounded
Aircraft $ 37 $ 22 14 — (19) (1) $ 32 $ 21 Severance and
Benefits Permanently
Grounded
Aircraft $ 14 $ 41 37 — (23) (1) $ 28 $ 40 Severance and Benefits Permanently Grounded Aircraft Balance at December 31, 2017 $ 37 $ 22 Accrual 25 — Payments (34 ) (2 ) Balance at June 30, 2018 $ 28 $ 20 Severance and Benefits Permanently Grounded Aircraft Balance at December 31, 2016 $ 14 $ 41 Accrual 78 — Payments (65 ) (12 ) Balance at June 30, 2017 $ 27 $ 29 ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.“UAL”"UAL" or the “Company”"Company") is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”"United"). This Quarterly Report on Form10-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’sUnited's operating revenues and operating expenses comprise nearly 100% of UAL’sUAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL’sUAL'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,”"we," "our," "us," and the “Company”"Company" in this report for disclosures that relate to all of UAL and United.world’sworld's largest airline alliance. UAL, through United and its regional carriers, operates approximately 4,600 flights a day to 354357 airports across five continents.FirstFirstSecond quarter 2018 net income was $147$684 million, or $0.52$2.48 diluted earnings per share, as compared to net income of $99$821 million, or diluted earnings per share of $0.32,$2.67, in the firstsecond quarter of 2017.6.5%8.0% to $8.1$9.9 billion during the firstsecond quarter of 2018 as compared to the firstsecond quarter of 2017.FirstSecond quarter 2018 aircraft fuel cost increased $405$721 million, 26.0%43.2% year-over-year.Unrestricted liquidity at March 31, 2018 was $6.5 billion, including $2.0 billion of undrawn commitments under the Company’s revolving credit facility.March 31,June 30, 2018, UAL repurchased approximately 8.45.9 million shares of its common stock in open market transactions for $0.6 billion.$407 million. As of March 31,June 30, 2018, the Company had approximately $2.4$2.0 billion remaining to purchase shares under its share repurchase program.4.7%6.4% and consolidated capacity increased 3.6%4.8% during the firstsecond quarter of 2018 as compared to the firstsecond quarter of 2017. The Company’sCompany's load factor for the firstsecond quarter of 2018 was 80.4%84.8%.The Company took delivery of four Boeing787-9 aircraft and two Boeing777-300ER aircraft duringCompleted the first quarter of 2018.5.5%5.0% year-over-year. Most of this growth will be concentrated in our domestic network, especially in ourmid-continent hubs. We believe greater scale and connectivity at our hubs reinforces our relevance and value proposition to our customers. Rebanking at our hubs is expected to drive significant additional connection opportunities. We will also expand flights innon-peak times of the year to more efficiently use our aircraft and facilities with the objective of driving an increase in profitability.Company’sCompany's annual fuel expense by approximately $97$98 million.March 31,June 30, 2018 as compared to the corresponding period in 2017.First2017.FirstSecond Quarter2017$147$684 million in the firstsecond quarter of 2018 as compared to net income of $99$821 million in the firstsecond quarter of 2017.2017. The Company considers a key measure of its performance to be operating income, which was $276 million$1.2 billion for the firstsecond quarter of 2018, as compared to $320 million$1.4 billion for the firstsecond quarter of 2017, a $44$276 million decrease year-over-year. Significant components of the Company’sCompany's operating results for the three months ended March 31June 30 are as follows (in millions, except percentage changes): 2018 2017 Increase
(Decrease) % Change $ 9,032 $ 8,426 $ 606 7.2 8,756 8,106 650 8.0 276 320 (44) (13.8) (92) (170) (78) (45.9) 37 51 (14) (27.5) $ 147 $ 99 $ 48 48.5 2018 2017 Increase
(Decrease) % Change 34,495 33,105 1,390 4.2 49,849 47,611 2,238 4.7 61,977 59,808 2,169 3.6 80.4% 79.6% 0.8 pts. N/A 13.15 12.80 0.35 2.7 16.35 16.07 0.28 1.7 14.13 13.55 0.58 4.3 $ 2.11 $ 1.71 $ 0.40 23.4 932 910 22 2.4 85,600 85,200 400 0.5 (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 2018 2017 Increase (Decrease) % Change Operating revenue $ 10,777 $ 10,008 $ 769 7.7 Operating expense 9,616 8,571 1,045 12.2 Operating income 1,161 1,437 (276 ) (19.2 ) Nonoperating expense (304 ) (160 ) 144 90.0 Income tax expense 173 456 (283 ) (62.1 ) Net income $ 684 $ 821 $ (137 ) (16.7 ) 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 receivedCompany's operations for each revenue passenger mile flown. 2018 2017 Increase (Decrease) % Change Passengers (thousands) (a) 41,058 38,247 2,811 7.3 Revenue passenger miles ("RPMs") (millions) (b) 59,945 56,356 3,589 6.4 Available seat miles ("ASMs") (millions) (c) 70,702 67,467 3,235 4.8 Passenger load factor (d) 84.8 % 83.5 % 1.3 pts. N/A Passenger revenue per available seat mile ("PRASM") (cents) 13.97 13.56 0.41 3.0 Average yield per revenue passenger mile ("Yield") (cents) (e) 16.48 16.24 0.24 1.5 Cost per available seat mile ("CASM") (cents) 13.60 12.70 0.90 7.1 Average price per gallon of fuel, including fuel taxes $ 2.26 $ 1.63 $ 0.63 38.7 Fuel gallons consumed (millions) 1,058 1,023 35 3.4 Average full-time equivalent employees 86,700 86,000 700 0.8 (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. March 31June 30 (in millions, except for percentage changes): 2018 2017 Increase
(Decrease) % Change 8,149 7,653 496 6.5 293 238 55 23.1 590 535 55 10.3 $ 9,032 $ 8,426 $ 606 7.2 2018 2017 Increase (Decrease) % Change Passenger revenue $ 9,880 $ 9,151 $ 729 8.0 Cargo 314 273 41 15.0 Other operating revenue 583 584 (1 ) (0.2 ) Total operating revenue $ 10,777 $ 10,008 $ 769 7.7 firstsecond quarter passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes: Domestic Atlantic Pacific Latin Total $ 317 $ 135 $ 16 $ 28 $ 496 6.8 % 12.1 % 1.5 % 3.4 % 6.5 % 1.6 % 1.4 % 5.0 % 5.3 % 2.2 % 2.2 % 1.0 % (1.9)% 2.9 % 1.7 % 1.6 % 8.8 % (1.5)% 5.1 % 2.7 % 5.1 % 10.5 % (3.4)% (1.9)% 4.2 % 4.5 % 11.0 % 3.4 % 0.4 % 4.7 % 5.2 % 3.1 % 3.0 % (1.6)% 3.6 % (0.5) 5.2 0.3 1.7 0.8 Domestic Atlantic Pacific Latin Consolidated Increase (decrease) from 2017: Passenger revenue (in millions) $ 523 $ 209 $ 39 $ (42 ) $ 729 Passenger revenue 9.2 % 12.9 % 3.7 % (5.2 )% 8.0 % Average fare per passenger — % 1.3 % 12.7 % 0.4 % 0.6 % Yield 1.3 % 0.9 % 4.3 % (4.2 )% 1.5 % PRASM 1.7 % 7.9 % 3.4 % (2.9 )% 3.0 % Passengers 9.2 % 11.5 % (8.0 )% (5.5 )% 7.3 % RPMs (traffic) 7.8 % 11.9 % (0.6 )% (1.0 )% 6.4 % ASMs (capacity) 7.4 % 4.7 % 0.2 % (2.3 )% 4.8 % Passenger load factor (points) 0.3 5.2 (0.7) 1.1 1.3 firstsecond quarter of 2018 increased $496$729 million, or 6.5%8.0%, as compared to theyear-ago period primarily due to a 4.7%6.4% increase in traffic and 0.8 pointsa 1.3 point increase in load factor. FirstSecond quarter 2018 PRASM and yield increased 2.7%3.0% and 1.7%1.5%, respectively, compared to the firstsecond quarter of 2017.$55$41 million, or 23.1%15.0%, in the firstsecond quarter of 2018 as compared to theyear-ago period primarily due to higher yieldyields and higher international freight volume.Other operating revenue increased $55 million, or 10.3%, in the first quarter of 2018 as compared to theyear-ago period primarily due to an approximately $50 millionone-time payment of MileagePlus related revenue.Company’sCompany's operating expenses for the three months ended March 31June 30 (in millions, except for percentage changes): 2018 2017 Increase
(Decrease) % Change $ 2,726 $ 2,636 $ 90 3.4 1,965 1,560 405 26.0 619 536 83 15.5 558 544 14 2.6 541 518 23 4.4 440 454 (14) (3.1) 342 319 23 7.2 127 179 (52) (29.1) 40 51 (11) NM 1,398 1,309 89 6.8 $ 8,756 $ 8,106 $ 650 8.0 2018 2017 Increase (Decrease) % Change Salaries and related costs $ 2,878 $ 2,842 $ 36 1.3 Aircraft fuel 2,390 1,669 721 43.2 Regional capacity purchase 681 549 132 24.0 Landing fees and other rent 603 541 62 11.5 Depreciation and amortization 557 536 21 3.9 Aircraft maintenance materials and outside repairs 438 472 (34 ) (7.2 ) Distribution expenses 393 385 8 2.1 Aircraft rent 119 152 (33 ) (21.7 ) Special charges 129 44 85 NM Other operating expenses 1,428 1,381 47 3.4 Total operating expenses $ 9,616 $ 8,571 $ 1,045 12.2 $90$36 million, or 3.4%1.3%, in the firstsecond quarter of 2018 as compared to theyear-ago period primarily due to contractually higher pay rates and benefit expenses driven by collective bargaining agreements, and a 0.5%0.8% increase in average full-time equivalent employees.$405$721 million, or 26.0%43.2%, year-over-yearin the second quarter of 2018 as compared to the year-ago period primarily due to a 23.4%38.7% increase in the average price per gallon of aircraft fuel and a 4.8% increase in the first quarter of 2018 compared to theyear-ago period.$83$132 million, or 15.5%24.0%, in the firstsecond quarter of 2018 as compared to theyear-ago period primarily due to a 6.3% increase inincreased regional capacityflying related to the Company’sCompany's initiative to improve connectivity at its domestic hubs.Aircrafthubs, as well as rate increases under various capacity purchase agreements with regional carriers.decreased $52increased $62 million, or 29.1%11.5%, in the firstsecond quarter of 2018 as compared to theyear-ago period due to increased rates and capacity growth.$89$47 million, or 6.8%3.4%, in the firstsecond quarter of 2018 as compared to theyear-ago period due to increases in purchased services related to our airport operations, technology initiatives, and trucking and handling of cargo shipments, and due to increased volumes of onboard food and beverages.Company’sCompany's special charges include the following for the three months ended March 31June 30 (in millions): 2018 2017 $ 14 $ 37 23 — 3 14 $ 40 $ 51 2018 2017 Impairment of assets $ 111 $ — Severance and benefit costs 11 41 (Gains) losses on sale of assets and other special charges 7 3 Special charges $ 129 $ 44 Company’sCompany's nonoperating income (expense) for the three months ended March 31June 30 (in millions, except for percentage changes): 2018 2017 Increase
(Decrease) % Change $ (176) $ (162) $ 14 8.6 19 23 (4) (17.4) 17 11 6 54.5 48 (42) (90) NM $ (92) $ (170) $ (78) (45.9) 2018 2017 Increase (Decrease) % Change Interest expense $ (177 ) $ (167 ) $ 10 6.0 Interest capitalized 14 21 (7 ) (33.3 ) Interest income 25 13 12 92.3 Miscellaneous, net (166 ) (27 ) 139 NM Total $ (304 ) $ (160 ) $ 144 90.0 firstsecond quarter of 2018, a $45$135 million gainloss for the change in market value of the Company’sCompany's equity investment in Azul, S.A. and $12 million of("Azul").non-serviceI cost component of the pension and postretirement net periodic benefit cost as compared to $26 million in theyear-ago period.Income Taxes.See Note 5 to the financial statements included in Part I, Item 1 of this report for information related to income taxes. 2018 2017 Increase (Decrease) % Increase (Decrease) Operating revenue $ 19,809 $ 18,434 $ 1,375 7.5 Operating expense 18,372 16,677 1,695 10.2 Operating income 1,437 1,757 (320 ) (18.2 ) Nonoperating expense (396 ) (330 ) 66 20.0 Income tax expense 210 507 (297 ) (58.6 ) Net income $ 831 $ 920 $ (89 ) (9.7 ) 2018 2017 Increase (Decrease) Passengers (thousands) (a) 75,553 71,352 4,201 5.9 RPMs (millions) (b) 109,794 103,967 5,827 5.6 ASMs (millions) (c) 132,679 127,275 5,404 4.2 Passenger load factor (d) 82.8 % 81.7 % 1.1 pts. N/A PRASM (cents) 13.59 13.20 0.39 3.0 Yield (cents) (e) 16.42 16.16 0.26 1.6 CASM (cents) 13.85 13.10 0.75 5.7 Average price per gallon of fuel, including fuel taxes $ 2.19 $ 1.67 $ 0.52 31.1 Fuel gallons consumed (millions) 1,990 1,933 57 2.9 Average full-time equivalent employees 86,200 85,600 600 0.7 (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. 2018 2017 Increase (Decrease) % Change Passenger revenue $ 18,030 $ 16,804 $ 1,226 7.3 Cargo 607 511 96 18.8 Other operating revenue 1,172 1,119 53 4.7 Total operating revenue $ 19,809 $ 18,434 $ 1,375 7.5 Domestic Atlantic Pacific Latin Consolidated Increase (decrease) from 2017: Passenger revenue (in millions) $ 841 $ 344 $ 55 $ (14 ) $ 1,226 Passenger revenue 8.2 % 12.6 % 2.6 % (0.9 )% 7.3 % Average fare per passenger 0.8 % 1.3 % 8.8 % 2.9 % 1.3 % Yield 1.7 % 1.0 % 1.3 % (0.6 )% 1.6 % PRASM 1.7 % 8.2 % 0.9 % 1.1 % 3.0 % Passengers 7.3 % 11.1 % (5.7 )% (3.7 )% 5.9 % RPMs (traffic) 6.3 % 11.5 % 1.3 % (0.3 )% 5.6 % ASMs (capacity) 6.4 % 4.0 % 1.6 % (1.9 )% 4.2 % Passenger load factor (points) (0.1) 5.2 (0.2) 1.5 1.1 2018 2017 Increase (Decrease) % Change Salaries and related costs $ 5,604 $ 5,478 $ 126 2.3 Aircraft fuel 4,355 3,229 1,126 34.9 Regional capacity purchase 1,300 1,085 215 19.8 Landing fees and other rent 1,161 1,085 76 7.0 Depreciation and amortization 1,098 1,054 44 4.2 Aircraft maintenance materials and outside repairs 878 926 (48 ) (5.2 ) Distribution expenses 735 704 31 4.4 Aircraft rent 246 331 (85 ) (25.7 ) Special charges 169 95 74 NM Other operating expenses 2,826 2,690 136 5.1 Total operating expenses $ 18,372 $ 16,677 $ 1,695 10.2 2018 2017 Impairment of assets $ 134 $ — Severance and benefit costs 25 78 (Gains) losses on sale of assets and other special charges 10 17 Special charges $ 169 $ 95 2018 2017 Increase (Decrease) % Change Interest expense $ (353 ) $ (329 ) $ 24 7.3 Interest capitalized 33 44 (11 ) (25.0 ) Interest income 42 24 18 75.0 Miscellaneous, net (118 ) (69 ) 49 71.0 Total $ (396 ) $ (330 ) $ 66 20.0 March 31,June 30, 2018, the Company had $4.5$5.1 billion in unrestricted cash, cash equivalents and short-term investments, as compared to $3.8 billion at December 31, 2017. The Company had its entire commitment capacity of $2.0 billion under the revolving credit facility of the Company’sthe Amended and Restated Credit and Guaranty Agreement (as amended, the "2017 Credit Agreement") available for borrowings. In May 2018, the 2017 Credit Agreement was amended to reduce the interest rate on the term loan by 0.25%. At March 31,June 30, 2018, the Company also had $106$107 million of restricted cash and cash equivalents, which is primarily collateral for letters of credit and collateral associated with obligations for facility leases and workers’workers' compensation.March 31,June 30, 2018, the Company had approximately $15.0$14.5 billion of debt and capital lease obligations, including $1.8$1.0 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. As of March 31,June 30, 2018, our current liabilities exceeded our current assets by approximately $5.9$5.2 billion. However, approximately $7.7$8.0 billion of our current liabilities are related to our advance ticket sales and frequent flyer deferred revenue, both of which largely represent revenue to be recognized for travel in the near future and not actual cash outlays. The deficit in working capital does not have an adverse impact to our cash flows, liquidity or operations.March 31,June 30, 2018, United had firm commitments and options to purchase aircraft from The Boeing Company (“Boeing”("Boeing") and Airbus S.A.S. (“Airbus”("Airbus") presented in the table below: Number of Firm
Commitments (a) 45 155 161 1 2 18 14 purchaseother rights for additional aircraft.Company’sCompany's future capital commitments could change. For the remainder of 2018, Unitedthe Company expects to take delivery of two Boeing777-300ER aircraft, three Boeing 787 aircraft, 10four Boeing 737 MAX aircraft, one Boeing 777-300ER aircraft and three usedBoeing 767-300ER aircraft. In MarchJuly 2018, United entered into an agreement to purchase 25 new Embraer E175 aircraft with expected delivery dates scheduled in 2019. United also has an agreement to purchase 20 used Airbus A319 aircraft with expected delivery dates scheduled in 2020 and 2021.March 31,June 30, 2018, UAL and United have total capital commitments primarily related to the acquisition of aircraft and related spare engines, aircraft improvements and include other capital purchase commitments for approximately $22.4 billion, of which approximately $2.4$1.7 billion, $3.7$3.3 billion, $2.0$3.0 billion, $2.7$2.8 billion, $1.8 billion and $9.8 billion are due in the last ninesix months of 2018 and for the full year for 2019, 2020, 2021, 2022 and thereafter, respectively. Any new firm aircraft orders, including through the exercise of purchase options and purchase rights, will increase the total future capital commitments of the Company.See Note 9financial statements included in Part I, Item 1 of this reportCompany's capital commitments for additional information onits firm order aircraft financing.and other related capital expenditures. The Company has also secured backstop financing commitments from certain of its aircraft manufacturers for a limited number of its future aircraft deliveries, subject to certain customary conditions. Financing may be necessarySee Note 9 to satisfy the Company’s capital commitmentsfinancial statements included in Part I, Item 1 of this report for its firm orderadditional information on aircraft and other related capital expenditures.March 31,June 30, 2018, a substantial portion of the Company’sCompany's assets, principally aircraft, certain route authorities and airport slots, and loyalty program intangible assets, was pledged under various loan and other agreements. We must sustain our profitability and/or access the capital markets to meet our significant long-term debt and capital lease obligations and future commitments for capital expenditures, including the acquisition of aircraft and related spare engines. S&P Moody’sMoody's Fitch UAL BB Ba2 BB United BB * BB $1.7$4.2 billion for the threesix months ended March 31,June 30, 2018 compared to $0.5$2.1 billion in the same period in 2017. Operating income for the first threesix months of 2018 and 2017 was $0.3 billion. Working$1.4 billion, compared to $1.8 billion in 2017. Changes in working capital items changed by approximately $1.2increased $2.3 billion year-over-year, primarily due towhich accounted for the increase in cash flow from operations, including a $0.3$0.5 billion increase in advance ticket sales associated with our overall traffic growth, a $0.5 billion increase in mileage sales to our co-branded credit card partner due to full utilization of the pre-purchased miles in 2017, a $0.4 billion increase related to timing of accounts payable, a $0.3 billion decrease in employee incentive payments in the first threesix months of 2018 as compared to theyear-ago period, a $0.2 billion increase in mileage sales to ourco-branded credit card partner due to full utilizationprepayments in the first six months of thepre-purchased miles in 2017 and a $0.3$0.4 billion increase related to timing of accounts payable.in other accrued liabilities.$1.0$1.7 billion and $0.7$1.8 billion in the threesix months ended March 31,June 30, 2018 and 2017, respectively. Capital expenditures for the threesix months ended March 31,June 30, 2018 were primarily attributable to additions of new aircraft, aircraft improvements, and increases in facility and information technology assets.threesix months ended March 31,June 30, 2018, the Company made debt and capital lease payments of $0.2$1.4 billion.threesix months ended March 31,June 30, 2018, United received and recorded $0.7$1.2 billion of proceeds as debt from the EETC pass-through trusts established in February and May 2018. See Note 9 to the financial statements included in Part I, Item 1 of this report for additional information.March 31,June 30, 2018, UAL repurchased approximately 8.45.9 million and 14.3 million shares, respectively, of UAL common stock in open market transactions for $0.6 billion.$0.4 billion and $1.0 billion, respectively. As of March 31,June 30, 2018, the Company had approximately $2.4$2.0 billion remaining to purchase shares under its share repurchase program.Company’sCompany's Annual Report on Form10-K for the fiscal year ended December 31, 2017 (the “2017"2017 Annual Report”Report"), the Company’sCompany'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.“Critical"Critical Accounting Policies”Policies" in Part II, Item 7, Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations in the 2017 Annual Report. Also see Note 2 to the financial statements contained in Part I, Item 1 of this report for a discussion of the Company’sCompany's updated accounting policies on Revenue Recognition and Frequent Flyer Accounting.Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report are forward-looking and thus reflect the Company’sCompany's current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to the Company’sCompany's operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as “expects,” “will,” “plans,” “anticipates,” “indicates,” “believes,” “estimates,” “forecast,” “guidance,” “outlook,” “goals”"expects," "will," "plans," "anticipates," "indicates," "believes," "estimates," "forecast," "guidance," "outlook," "goals" and similar expressions are intended to identify forward-looking statements.“SEC”"SEC").ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.ITEM 4.CONTROLS AND PROCEDURES.SEC’sSEC's rules and forms, and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The management of UAL and United, including the Chief Executive Officer and Chief Financial Officer, performed an evaluation to conclude with reasonable assurance that UAL’sUAL's and United’sUnited's disclosure controls and procedures were designed and operating effectively to report the information each company is required to disclose in the reports they file with the SEC on a timely basis. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer of UAL and United have concluded that as of March 31,June 30, 2018, disclosure controls and procedures were effective.Duringduring the Quarter Ended March 31,June 30, 2018March 31,June 30, 2018, there were no changes in UAL’sUAL's or United’sUnited's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, their internal control over financial reporting (as defined in rules13a-15(f) and15d-15(f) under the Securities Exchange Act of 1934).ITEM 1.LEGAL PROCEEDINGSITEM 1A.RISK FACTORSITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.firstsecond quarter of fiscal year 2018: Total number of
shares
purchased (a)(b) Average price paid
per share (b)(c) Total number of
shares purchased as
part of publicly
announced plans or
programs (a) Approximate dollar
value of shares that
may yet be purchased
under the plans or
programs (in millions) (a) 1,051,444 $ 66.57 1,051,444 $ 2,930 3,101,048 66.27 3,101,048 2,725 4,255,515 68.89 4,255,515 2,431 8,408,007 8,408,007 Period April 2018 3,224,922 $ 68.11 3,224,922 $ 2,212 May 2018 1,789,844 68.42 1,789,844 2,089 June 2018 916,248 71.15 916,248 2,024 Total 5,931,014 5,931,014 UAL’sUAL's Board of Directors authorized a $3.0 billion share repurchase program to acquire UAL’sUAL's common stock. As of March 31,June 30, 2018, the Company had approximately $2.4$2.0 billion remaining to purchase shares under its share repurchase program. UAL may repurchase shares through the open market, privately negotiated transactions, block trades or accelerated share repurchase transactions from time to time in accordance with applicable securities laws.243,0031,226 shares were withheld under these plans in the firstsecond quarter of 2018 at an average price per share of $67.72.$69.17. These shares of common stock withheld to satisfy tax withholding obligations may be deemed to be “issuer purchases”"issuer purchases" of shares that are required to be disclosed pursuant to this Item.ITEM 6.EXHIBITS.Registrant Exhibit Registrant10.1 Exhibit^10.2 12.1 ^10.3 12.1 UAL 12.2 12.2 United 31.1 31.1 UAL 31.2 31.2 UAL 31.3 31.3 United 31.4 31.4 United 32.1 32.1 UAL 32.2 32.2 United 101.1 XBRL Instance Document 101.2 UALUnited101.2 XBRL Taxonomy Extension Schema Document 101.3 UALUnited101.3 XBRL Taxonomy Extension Calculation Linkbase Document 101.4 UALUnited101.4 XBRL Taxonomy Extension Definition Linkbase Document 101.5 UALUnited101.5 XBRL Taxonomy Extension Labels Linkbase Document 101.6 UALUnited101.6 XBRL Taxonomy Extension Presentation Linkbase Document United Continental Holdings, Inc. (Registrant) Date: April 18, 2018 Date: July 18, 2018 By: Andrew C. Levy Andrew C. LevyGerald LadermanExecutiveSenior Vice President Finance and acting Chief Financial Officer
(Principal Financial Officer)Date: April 18, 2018 Date: July 18, 2018 By: United Airlines, Inc. (Registrant) Date: April 18, 2018 Date: July 18, 2018 By: Andrew C. Levy Andrew C. LevyGerald LadermanExecutiveSenior Vice President Finance and acting Chief Financial Officer
(Principal Financial Officer)Date: April 18, 2018 Date: July 18, 2018 By: 36