United Airlines Holdings, Inc. (UAL)

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

This Management's Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 Form 10-K") to enhance the understanding of our results of operations, financial condition and cash flows.

United Airlines Holdings, Inc. (together with its consolidated subsidiaries, "UAL" or the "Company") is a holding company incorporated in Delaware and its wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, "United"). As UAL consolidates United for financial statement purposes, and United comprises substantially all of UAL's operating revenues, operating expenses, assets, liabilities and operating cash flows, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. We sometimes use the words "we," "our," "us," and the "Company" in this report for disclosures that relate to all of UAL and United.

Key Trends Impacting Our Business

Our industry is dynamic, highly competitive and subject to a number of industry-specific factors and global macroeconomic conditions that may cause our actual results of operations to differ from our historical results of operations or current expectations. The economic, market and legal factors and trends that we currently believe are or will be most impactful to our results of operations and financial condition include the following:

•Geopolitical Conflicts in the Middle East: During the first half of 2026, geopolitical conflicts in the Middle East caused disruption of flying in the region and contributed to materially higher global fuel prices. In response, we took immediate and decisive actions to mitigate the impact of the operational disruptions and rising fuel costs, including reducing capacity and adjusting fares and fees. While our long-term outlook is positive due to our expectation that customer demand will remain strong, we may continue to be impacted by future volatility in the fuel market, especially if the geopolitical conflicts in the Middle East escalate or expand.

•Regulatory or Court Decisions Restricting Our Capacity Targets: We remain vulnerable to regulatory actions (including by the Federal Aviation Administration) or court decisions that would force us to adjust our planned capacity at our hub locations.

•Governmental Funding Constraints: We are working with our U.S. federal government partners to reduce passenger travel disruptions due to potential budgetary decisions limiting or delaying government spending or reducing staffing of government agencies with which we interact routinely, including as a result of a federal government shutdown.

We will monitor the potential favorable or unfavorable impacts of these and other factors on our business, operations, financial condition, future results of operations, liquidity and financial flexibility, which are dependent on future developments, including as a result of those factors discussed in Part I, Item 1A. Risk Factors, of our 2025 Form 10-K.

RESULTS OF OPERATIONS

The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three and six months ended June 30, 2026, as compared to the corresponding period in 2025.

Second Quarter 2026 Compared to Second Quarter 2025

Significant components of the Company's operating results for the three months ended June 30 are as follows (in millions, except percentage changes):

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

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

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

Passenger revenue increased $2.3 billion, or 16.4%, in the second quarter of 2026 as compared to the year-ago period, primarily due to a 12.1% increase in yield and a 5.4% increase in the number of passengers flown.

Cargo revenue increased $97 million, or 22.6%, in the second quarter of 2026 as compared to the year-ago period, primarily due to an increase in freight yields.

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Other operating revenue increased $75 million, or 7.7%, in the second quarter of 2026 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending with our co-branded credit card partner, JPMorgan Chase Bank, N.A., and an increase in visitor volumes at United Club lounges.

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

Salaries and related costs increased $274 million, or 6.2%, in the second quarter of 2026 as compared to the year-ago period, primarily due to increased pay as a result of the increase in flying activity, a 5.6% increase in headcount and pay rate increases for various eligible employee groups, most recently the employees represented by the Association of Flight Attendants ("AFA") per the new collective bargaining agreement.

Aircraft fuel expense increased $2.3 billion, or 84.1%, in the second quarter of 2026 as compared to the year-ago period, primarily due to a higher average price per gallon of fuel and increased consumption from increased flight activity.

Landing fees and other rent increased $95 million, or 9.9%, in the second quarter of 2026 as compared to the year-ago period, primarily due to rate increases at various airports as well as higher landed weight volume from increased flight activity.

Regional capacity purchase increased $67 million, or 9.8%, in the second quarter of 2026 as compared to the year-ago period, primarily due to a 6% increase in regional flying activity and annual rate increases under United's capacity purchase agreements ("CPAs").

Distribution expense increased $157 million, or 32.3%, in the second quarter of 2026 as compared to the year-ago period, primarily due to higher credit card fees and agency commissions driven by the overall increase in passenger revenue as well as the refinement of assumptions used in determining our credit card fees expense in the year-ago period.

For details on the Company's Special charges (credits), see Note 10 to the financial statements included in Part I, Item 1 of this report.

Other operating expenses increased $215 million, or 8.6%, in the second quarter of 2026 as compared to the year-ago period, primarily due to an increase in flight activity and number of passengers, including increased costs for catering, ground handling and passenger services, cr

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Management's discussion and analysis of financial condition and results of operations is provided as a supplement to and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-K and the description of our business and reportable segments in Part I, Item 1. Business of this Form 10-K to enhance the understanding of our results of operations, financial condition and cash flows.

This section generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 are not included in this Form 10-K and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's 2024 Annual Report.

Executive Summary

Overview

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

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As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United's operating revenues and operating expenses comprise nearly 100% of UAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL's assets, liabilities and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words "we," "our," "us," and the "Company" in this report for disclosures that relate to all of UAL and United.

Our current expectations described below are forward-looking statements and our actual results and timing may vary materially based on various factors that include, but are not limited to, those discussed below under "Strategy," "Economic and Market Factors," "Governmental Actions," "Cautionary Statement Regarding Forward-Looking Statements" and in Part I, Item 1A. Risk Factors, of this Form 10-K. The results presented in this report are not necessarily indicative of future operating results.

Strategy

Our shared purpose is "Connecting People. Uniting the World." We have the most comprehensive route network among North American carriers, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C.

We are the largest airline measured by available seat miles in the world, helping to connect around 181 million passengers to more than 380 destinations across six continents. The Company remains focused on delivering on four strategic pillars, which it believes has helped, and will continue, to differentiate United from the rest of the industry:

•United Next: In 2025 we continued to make progress with our United Next plan to align our network and product with the potential of our hubs while remaining focused on protecting the safety of our employees and customers and providing a superior customer experience. United Next aims to increase customer choice and win brand-loyal customers by offering a diversity of products ranging from Basic Economy to Polaris and growing our leading global network, which the Company expects will lead to diverse revenue streams for the Company. As part of our United Next growth plan, we expect to take delivery of over 630 new narrow- and widebody aircraft by the end of 2034. The new aircraft that the Company has taken delivery of to date have increased our gauge, scale, and connectivity, as well as improved the Company's fuel efficiency. Other key highlights of our United Next plan include:

–increasing our employee headcount by more than 38,000 employees since 2020;

–surpassing 530 new and retrofit aircraft featuring our signature interior with bigger bins, seatback screens at every seat and Bluetooth connectivity;

–expanding our leading global network to destinations like Nuuk, Greenland; Ulaanbaatar, Mongolia; Faro, Portugal; Puerto Escondido, Mexico; Palermo, Italy; Bilbao, Spain; and Madeira Island, Portugal;

–launching Kinective MediaSM (the first media network that uses insights from travel behaviors to connect customers to personalized advertising, experiences and offers from leading brands);

–bringing Starlink's Wi-Fi service (the world's fastest, most reliable Wi-Fi in the sky) to our United Express regional aircraft and beginning installation on our mainline aircraft; and

–making significant technology changes that empower our employees and improve the customer experience.

•Operational excellence: The most important factor for customer satisfaction is on-time flights. We face some unique challenges in this respect because we operate hubs in the most congested and constrained airports in the country. That backdrop means that United needs to be a leader at using technology to overcome these challenges. We have been working strategically to overcome operational challenges and continue to innovate in order to make advancements in this area.

•Pre-tax margin: We believe that best-in-class margin performance will provide the cash flow needed to support our planned investments in growth.

•Customer service: We believe that excellent customer service is part of de-commoditizing air travel. Our people are our greatest asset and they are by far the most important part of our product. Ultimately our people provide customers with the service they expect.

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Economic and Market Factors

We remain vulnerable to a number of industry-specific and global macroeconomic factors that may cause our actual results of operations to differ from our historical results of operations or current expectations. The economic and market factors and trends that we currently believe are or will be most impactful to our results of operations and financial condition include the following: the execution and effect of our business strategies, including our United Next plan; supply chain constraints and related costs affecting us and our partners; volatile fuel prices; increasing maintenance expenses; and an economic downturn leading to a decrease in demand for air travel or fluctuations in foreign currency exchange rates that may impact international travel demand. We continue to monitor the potential favorable or unfavorable impacts of these and other factors on our business, operations, financial condition, future results of operations, liquidity and financial flexibility, which are dependent on future developments, including as a result of those factors discussed in Part I, Item 1A. Risk Factors.

Governmental Actions

We operate in complex, highly regulated environments in the U.S., the European Union, the United Kingdom and other regions around the world. Legal requirements that we currently believe are or will be most impactful to our results of operations and financial condition include the following: the closure of our flying airspace and termination of other operations due to regional conflicts; delays in aircraft certification (especially relating to the 737 MAX 10 aircraft); an extended federal government shutdown as well as any other budgetary decisions limiting or delaying government spending or reducing staffing of government agencies with which we interact routinely; any legal requirement that would result in a reshaping of the benefits that we provide to our consumers through our loyalty program or the co-branded credit cards issued by our partner; the effect of any potential changes in trade tariffs that we are unable to mitigate; and certain rules and regulations proposed by the DOT that would impose additional costs and operational restrictions on airlines. The impact of changing and new legal requirements generally cannot be reasonably predicted and those requirements may ultimately require extensive system and operational changes, be difficult to implement, increase our operating costs and require significant capital expenditures.

Results of Operations

Select financial data and operating statistics are provided in the tables below:

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Operating Revenue. The table below illustrates the year-over-year percentage change in the Company's operating revenues for the years ended December 31 (in millions, except percentage changes):

The table below presents passenger revenue and select operating data of the Company, broken out by geographic region, expressed as year-over-year changes:

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