# United Airlines Holdings, Inc. (UAL) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from United Airlines Holdings, Inc.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/100517/000010051723000048/ual-20221231.htm
Accession: 0000100517-23-000048
Filing date: 2023-02-16
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/UAL/
All MD&A years: /company/UAL/mda/
Previous year: /company/UAL/mda/fy2021/ (FY 2021)
Next year: /company/UAL/mda/fy2023/ (FY 2023)

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 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission (the "SEC") on February 18, 2022 (the "2021 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").

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

38

Table of Contents

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 business and operating results for 2022 continued to be negatively impacted by the COVID-19 pandemic, particularly in the first half of the year. Given the more significant impact of the pandemic on our business and operating results in 2020 and 2021, we believe that a comparison of our 2022 results to 2019 for certain key metrics in this financial overview discussion is more reflective of the impact of the COVID-19 pandemic.

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

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.

Our United Next plan is our fundamental strategic evolution for driving future growth that we believe will have a transformational effect on the customer experience and earnings power of our business. As part of our United Next plan, in June 2021 we announced our firm order for the purchase of 270 new Boeing and Airbus aircraft, which at the time was the largest combined order in the airline's history and the biggest by an individual carrier in the last decade. In December 2022, we announced the largest widebody order by a U.S. carrier in commercial aviation history (100 Boeing 787 Dreamliners with options to purchase 100 more), the exercise of options to purchase 44 Boeing 737 MAX aircraft for delivery between 2024 and 2026, the firm orders of 56 more Boeing 737 MAX aircraft for delivery between 2027 and 2028 and the acquisition of an additional 100 options to purchase additional Boeing 737 MAX aircraft. We now expect to take delivery of about 700 new narrow and widebody aircraft by the end of 2033.

Our groundbreaking United Next strategy is expected to increase United's average gauge in North America, to increase the total number of available seats per departure and to significantly lower carbon emissions per seat. United will retrofit 100% of its mainline, narrow-body planes with its signature interior that includes seat-back entertainment in every seat, larger overhead bins for every passenger's carry-on bag and the industry's fastest available in-flight WiFi, as well as a bright look-and-feel with LED lighting. The carrier's international widebodies will feature the United Polaris® business class seat as well as United Premium Plus® seating. The Company plans to replace older, smaller mainline jets and at least 200 single-class regional jets with larger aircraft, which we expect will lead to fuel efficiency benefits compared to older planes, including an expected 17-25% lower carbon emissions per seat compared to older planes. We believe that United Next will allow us to differentiate our network and segment our products with a greater premium offering while also maintaining fare competitiveness with low-cost carriers.

The Company remains squarely focused on delivering on four strategic pillars:

•United Next: Along with the items mentioned above, additional elements of the United Next plan include hiring over 50,000 new employees, expanding our leading global network to underserved countries and making significant technology changes designed to improve the customer experience and drive operational efficiency.

•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 believe that we have been doing that, but we have a lot of ideas to continue making advancements in this area.

•Adjusted cost per available seat mile ("CASM-ex"): We believe that our CASM-ex (a non-GAAP financial measure defined as cost or operating expense per available seat mile ("CASM") excluding fuel, profit sharing, third-party business expense and special charges (credits)) targets in connection with our United Next plan will be key in driving absolute and relative margin improvement. Moreover, having best-in-class CASM-ex performance is expected to 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. A great route network, new aircraft, great

39

Table of Contents

Wi-Fi, etc. are a necessary but not sufficient condition for a great brand. Ultimately our people provide customers with the service they expect.

Economic and Market Factors

The airline industry is highly competitive, marked by significant competition with respect to routes, fares, schedules (both timing and frequency), services, products, customer service and frequent flyer programs. We, like other companies in our industry, have been subject to these and other industry-specific competitive dynamics. In addition, our operations, supply chain, partners and suppliers have been subject to various global macroeconomic factors. We expect to continue to remain vulnerable to a number of industry-specific and global macroeconomic factors that may cause our actual results of operations to differ from our historical results of operations or current expectations. The factors and trends that we currently believe are or will be most impactful to our results of operations and financial condition include the following: the execution risks associated with our United Next plan; the impact on the Company of significant operational challenges by third parties on which we rely; rising inflationary pressures; labor market and supply chain constraints and related costs affecting us and our partners; volatile fuel prices; aircraft delivery delays; the lasting effects of the COVID-19 global pandemic and related governmental regulations and restrictions, that we believe will change how our customers fly in ways that we expect to be both positive and negative for the Company, including the lingering impact of the pandemic on the return of business and international—especially in our China market— travel demand to pre-COVID-19 levels; the closure of our flying airspace and termination of other operations due to regional conflicts, including the continuation of the suspension of our overflying in Russian airspace as well as third-party general sales agent services in Russia as a result of the Russia-Ukraine military conflict and an escalation of the broader economic consequences of the conflict beyond their current scope; and changes in general economic conditions in the markets in which the Company operates, including an economic downturn leading to a decrease in demand for air travel or fluctuations in foreign currency exchange rates that may impact international travel demand. We continue to monitor the potential favorable or unfavorable impacts of these and other factors on our business, operations, financial condition and future results of operations, which are dependent on future developments, including as a result of those factors discussed in Item 1A. Risk Factors, of this Form 10-K. Our future results of operations may be subject to volatility and our growth plans may be delayed, particularly in the short term, due to the impact of the above factors and trends. For instance, we have delayed a portion of our previously planned capacity increases for full year 2023 in response to several factors and trends noted above and may need to implement further modifications. However, based on the current trend of our business operations, the Company believes that the long-term outlook for the Company remains positive due to the expected continued return of travel demand and the anticipated benefits by the United Next plan. Absent significant and prolonged COVID-19 relapses or global economic disruptions, we believe that the expected long-term increase in travel demand will offset increased costs and that the expected operational challenges can be managed in a manner that will allow us to support increased demand.

Despite the lingering effects of COVID-19 induced business interruptions, which has caused the Company's recovery from the COVID-19 pandemic not to follow a linear path, we have seen increasing demand for travel both domestically and internationally in countries where entry is permitted as we operated at approximately 87% of our 2019 capacity during 2022. However, it remains difficult to reasonably assess or predict the full extent of the impact of the COVID-19 pandemic on the broader economy and how consumer behavior may change—and whether such change is temporary or permanent. As a result, the Company's operational and financial performance, particularly in the short-term, may be subject to volatility in the future. Risks and uncertainties related to the COVID-19 pandemic are further described in Part I, Item 1A. Risk Factors.

Results of Operations

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

[[GREPCENT_TABLE]]
[["(in millions)","2022","","2021","","2020","","2019"],["Operating revenue","$","44,955","","","$","24,634","","","$","15,355","","","$","43,259"],["Operating expense","42,618","","","25,656","","","21,714","","","38,958"],["Operating income (loss)","2,337","","","(1,022)","","","(6,359)","","","4,301"],["Nonoperating expense, net","(1,347)","","","(1,535)","","","(2,463)","","","(387)"],["Income tax expense (benefit)","253","","","(593)","","","(1,753)","","","905"],["Net income (loss)","$","737","","","$","(1,964)","","","$","(7,069)","","","$","3,009"]]
[[/GREPCENT_TABLE]]

40

Table of Contents

[[GREPCENT_TABLE]]
[["","2022","","2021","","2020","","2019"],["Passengers (thousands) (a)","144,300","","104,082","","57,761","","162,443"],["Revenue passenger miles (\"RPMs\") (millions) (b)","206,791","","128,979","","73,883","","239,360"],["Available seat miles (\"ASMs\") (millions) (c)","247,858","","178,684","","122,804","","284,999"],["Cargo revenue ton miles (millions) (d)","3,041","","3,285","","2,711","","3,329"],["Passenger load factor (e)","83.4","%","","72.2","%","","60.2","%","","84.0","%"],["Passenger revenue per available seat mile (\"PRASM\") (cents)","16.15","","11.30","","9.61","","13.90"],["Total revenue per available seat mile (\"TRASM\") (cents)","18.14","","13.79","","12.50","","15.18"],["Average yield per revenue passenger mile (\"Yield\") (cents) (f)","19.36","","15.66","","15.98","","16.55"],["CASM (cents)","17.19","","14.36","","17.68","","13.67"],["CASM-ex (Non-GAAP) (cents)","11.73","","12.96","","17.13","","10.21"],["Average stage length (miles) (g)","1,437","","1,315","","1,307","","1,460"],["Employee headcount, as of December 31","92,800","","84,100","","74,400","","95,900"],["(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)The number of cargo revenue tons transported multiplied by the number of miles flown.(e)RPMs divided by ASMs.(f)The average passenger revenue received for each revenue passenger mile flown.(g)Average stage length equals the average distance a flight travels weighted for size of aircraft."]]
[[/GREPCENT_TABLE]]

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):

[[GREPCENT_TABLE]]
[["","2022","","2021","","Increase (Decrease)","","% Change"],["Passenger revenue","$","40,032","","","$","20,197","","","$","19,835","","","98.2"],["Cargo","2,171","","","2,349","","","(178)","","","(7.6)"],["Other operating revenue","2,752","","","2,088","","","664","","","31.8"],["Total operating revenue","$","44,955","","","$","24,634","","","$","20,321","","","82.5"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","Increase (decrease) from 2021:"],["","","Domestic","","Atlantic","","Pacific","","Latin","","Total"],["Passenger revenue (in millions)","","$","11,104","","","$","5,634","","","$","1,513","","","$","1,584","","","$","19,835"],["Passenger revenue","","74.9","%","","244.3","%","","247.2","%","","64.3","%","","98.2","%"],["Average fare per passenger","","31.2","%","","21.6","%","","4.8","%","","35.4","%","","43.0","%"],["Yield","","27.0","%","","31.8","%","","(15.1)","%","","24.6","%","","23.6","%"],["PRASM","","36.0","%","","80.9","%","","100.0","%","","50.5","%","","42.9","%"],["Passengers","","33.3","%","","183.1","%","","231.5","%","","21.4","%","","38.6","%"],["RPMs","","37.8","%","","161.3","%","","309.0","%","","31.8","%","","60.3","%"],["ASMs","","28.7","%","","90.3","%","","73.4","%","","9.1","%","","38.7","%"],["Passenger load factor (points)","","5.6","","","22.5","","","39.3","","","14.4","","","11.2"]]
[[/GREPCENT_TABLE]]

Passenger revenue increased $19.8 billion, or 98.2%, in 2022 as compared to 2021, primarily due to the ongoing recovery in air travel which was impacted by the COVID-19 pandemic and strength in the pricing environment as a result of inflationary pressures on fuel prices and other costs.

Cargo revenue decreased $178 million, or 7.6%, in 2022 as compared to 2021, primarily due to lower yields as a result of increased market capacity. Cargo revenue was especially high in 2021 due to the limited market capacity, lower passenger load factors and the utilization of cargo-only flights in the first half of 2021.

Other operating revenue increased $664 million, or 31.8%, in 2022 as compared to 2021, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending recovery with our co-branded credit card partner,

41

Table of Contents

JPMorgan Chase Bank, N.A. ("Chase"), as well as an increase in the purchases of United Club memberships and lounge passes in the current year.

Operating Expense. The table below includes data related to the Company's operating expense for the years ended December 31 (in millions, except percentage changes):

[[GREPCENT_TABLE]]
[["","2022","","2021","","Increase (Decrease)","","% Change"],["Aircraft fuel","$","13,113","","","$","5,755","","","$","7,358","","","127.9"],["Salaries and related costs","11,466","","","9,566","","","1,900","","","19.9"],["Landing fees and other rent","2,576","","","2,416","","","160","","","6.6"],["Depreciation and amortization","2,456","","","2,485","","","(29)","","","(1.2)"],["Regional capacity purchase","2,299","","","2,147","","","152","","","7.1"],["Aircraft maintenance materials and outside repairs","2,153","","","1,316","","","837","","","63.6"],["Distribution expenses","1,535","","","677","","","858","","","126.7"],["Aircraft rent","252","","","228","","","24","","","10.5"],["Special charges (credits)","140","","","(3,367)","","","(3,507)","","","NM"],["Other operating expenses","6,628","","","4,433","","","2,195","","","49.5"],["Total operating expenses","$","42,618","","","$","25,656","","","$","16,962","","","66.1"]]
[[/GREPCENT_TABLE]]

Aircraft fuel expense increased $7.4 billion, or 127.9%, in 2022 as compared to 2021, primarily due to both a higher average price per gallon of fuel and increased consumption from higher flight activity. The table below presents the significant changes in aircraft fuel cost per gallon for the years ended December 31 (in millions, except percentage changes and per gallon data):

[[GREPCENT_TABLE]]
[["","","2022","","2021","","% Change"],["Fuel expense","","$","13,113","","","$","5,755","","","127.9"],["Total fuel consumption (gallons)","","3,608","","","2,729","","","32.2"],["Average price per gallon","","$","3.63","","","$","2.11","","","72.0"]]
[[/GREPCENT_TABLE]]

Salaries and related costs increased $1.9 billion, or 19.9%, in 2022 as compared to 2021, primarily due to an approximately 10% increase in headcount, volume-driven pay from increased flight activity, an increase in employee incentive accruals due to current year profitability (including profit sharing of $133 million in 2022) and $405 million of employee retention credits under the CARES Act in 2021 that did not reoccur in 2022.

Landing fees and other rent increased $160 million, or 6.6%, in 2022 as compared to 2021, primarily due to an increase in landed weight volume as a result of increased flight activity.

Regional capacity purchase costs increased $152 million, or 7.1%, in 2022 as compared to 2021, primarily due to rate increases.

Aircraft maintenance materials and outside repairs increased $837 million, or 63.6%, in 2022 as compared to 2021, primarily due to higher volumes of flying, increased engine overhauls, higher repair volumes, heavy airframe checks and contractual rate escalations.

Distribution expenses increased $858 million, or 126.7%, in 2022 as compared to 2021, primarily due to higher credit card fees, higher travel agency commissions and higher volumes of global distribution fees as a result of the overall increase in passenger revenue. Distribution expenses were also impacted by a higher proportion of business travel as compared to leisure travel, which can result in higher cost distribution channels and forms of payment.

The table below presents special charges (credits) recorded by the Company during the years ended December 31 (in millions):

[[GREPCENT_TABLE]]
[["","2022","","2021"],["CARES Act grant","$","\u2014","","","$","(4,021)"],["Severance and benefit costs","\u2014","","","438"],["Impairment of assets","\u2014","","","97"],["(Gains) losses on sale of assets and other special charges","140","","","119"],["Total special charges (credits)","$","140","","","$","(3,367)"]]
[[/GREPCENT_TABLE]]

42

Table of Contents

See Note 13 to the financial statements included in Part II, Item 8 of this report for additional information.

Other operating expenses increased $2.2 billion, or 49.5%, in 2022 as compared to 2021, primarily due to increases in ground handling, passenger services, food and beverage offerings, navigation fees and personnel-related costs as a direct result of the increase in flight activity and inflationary pressures and higher expenditures on information technology projects and services.

Nonoperating Income (Expense). The following table illustrates the year-over-year dollar and percentage changes in the Company's nonoperating income (expense) for the years ended December 31 (in millions, except percentage changes):

[[GREPCENT_TABLE]]
[["","2022","","2021","","Increase (Decrease)","","% Change"],["Interest expense","$","(1,778)","","","$","(1,657)","","","$","121","","","7.3"],["Interest income","298","","","36","","","262","","","NM"],["Interest capitalized","105","","","80","","","25","","","31.3"],["Unrealized gains (losses) on investments, net","20","","","(34)","","","(54)","","","(158.8)"],["Miscellaneous, net","8","","","40","","","(32)","","","(80.0)"],["Total nonoperating expense, net","$","(1,347)","","","$","(1,535)","","","$","(188)","","","(12.2)"]]
[[/GREPCENT_TABLE]]

Interest expense increased $121 million, or 7.3%, in 2022 as compared to 2021, primarily due to higher interest rates on variable rate debt as well as a full year of interest expense in 2022 on certain debt incurred in the second quarter of 2021.

Interest income increased $262 million in 2022 as compared to 2021, primarily due to higher short-term investments in U.S. government and agency notes. See Note 8 to the financial statements included in Part II, Item 8 of this report for additional information.

Unrealized gains on investments, net was $20 million in 2022 as compared to unrealized losses on investments, net of $34 million in 2021, primarily due to the change in the market value of the Company's investments in equity securities. See Notes 8 and 13 to the financial statements included in Part II, Item 8 of this report for additional information.

Income Taxes. See Note 6 to the financial statements included in Part II, Item 8 of this report for information related to income taxes.

Liquidity and Capital Resources

As of December 31, 2022, the Company had $16.4 billion in unrestricted cash, cash equivalents and short-term investments, a decrease of approximately $2.0 billion from December 31, 2021. We believe that our existing cash, cash equivalents and short-term investments, together with cash generated from operations, will be sufficient to satisfy our anticipated liquidity needs for the next twelve months and we expect to meet our long-term liquidity needs with our anticipated access to the capital markets and projected cash from operations. We regularly assess our anticipated working capital needs, debt and leverage levels, debt maturities, capital expenditure requirements (including in connection with our capital commitments for our firm order aircraft) and future investments or acquisitions in order to maximize shareholder return, efficiently finance our ongoing operations and maintain flexibility for future strategic transactions. We also regularly evaluate our liquidity and capital structure to ensure financial risks, adequate liquidity access and lower cost of capital are efficiently managed.

The Revolving Credit and Guaranty Agreement, under the Term Loan Credit and Guaranty Agreement (the "2021 Term Loan Facility"), provides revolving loan commitments of up to $1.75 billion until April 21, 2025, subject to certain customary conditions. No borrowings were outstanding under this facility at December 31, 2022.

We have a significant amount of fixed obligations, including debt, leases of aircraft, airport and other facilities, and pension funding obligations. As of December 31, 2022, the Company had approximately $37.3 billion of debt, finance lease, operating lease and other financial liabilities, including $3.6 billion that will become due in the next 12 months. In addition, we have substantial noncancelable commitments for capital expenditures, including the acquisition of certain new aircraft and related spare engines. Our debt agreements contain customary terms and conditions as well as various affirmative, negative and financial covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness and pay dividends or repurchase stock. As of December 31, 2022, UAL and United were in compliance with their respective debt covenants. As of December 31, 2022, a substantial portion of the Company's assets, principally aircraft and certain related assets, its loyalty program, route authorities and airport slots, was pledged under various loan and other agreements. See Note 9 to the financial statements included in Part II, Item 8 of this report for additional information on aircraft financing and other debt instruments.

43

Table of Contents

For 2023, the Company expects approximately $8.5 billion of gross capital expenditures (including expenditures for assets acquired through the issuance of debt, finance leases and other financial liabilities). The Company's estimate for aircraft expenditures reflects its assumptions regarding delayed aircraft deliveries. See Note 12 to the financial statements included in Part II, Item 8 of this report for additional information on commitments, including aircraft expenditures reflecting contractual delivery dates without adjustment for expected delays. The Company has backstop financing commitments available from certain of its aircraft manufacturers for a limited number of its future aircraft deliveries, subject to certain customary conditions.

The following table summarizes our cash flow for the years ended December 31 (in millions):

[[GREPCENT_TABLE]]
[["","","2022","","2021","","2020","","2019"],["Total cash provided by (used in):"],["Operating activities","","$","6,066","","","$","2,067","","","$","(4,133)","","","$","6,909"],["Investing activities","","(13,829)","","","(1,672)","","","50","","","(4,560)"],["Financing activities","","(3,349)","","","6,396","","","12,957","","","(1,280)"],["Net increase (decrease) in cash, cash equivalents and restricted cash","","$","(11,112)","","","$","6,791","","","$","8,874","","","$","1,069"]]
[[/GREPCENT_TABLE]]

See the Statements of Consolidated Cash Flows included in Part II, Item 8 of this report for additional information.

Operating Activities. Cash flows provided by operating activities for 2022 were $4.0 billion higher than 2021 primarily due to an approximately $3.4 billion increase in operating income as improvements in the demand for air travel continued and an approximately $0.6 billion increase in various working capital items.

In 2021, United entered into two Payroll Support Program Extension Agreements (collectively, the "PSP2 and PSP3 Agreements") with the U.S. Treasury Department ("Treasury") providing the Company with total funding of approximately $5.8 billion, pursuant to the Payroll Support Program. These funds were used to pay for the wages, salaries and benefits of United employees, including the payment of lost wages, salaries and benefits to returning employees who were previously impacted by involuntary furloughs. Approximately $4.1 billion was provided as a direct grant and $1.7 billion as indebtedness evidenced by two 10-year senior unsecured promissory notes (collectively, the "PSP2 and PSP3 Notes"). See Note 2 to the financial statements included in Part II, Item 8 of this report for additional information on the warrants issued in connection with the PSP2 and PSP3 Notes and Note 9 to such financial statements for a discussion of the PSP2 and PSP3 Notes.

Investing Activities. Cash flows used in investing activities increased $12.2 billion in 2022 as compared to the year-ago period mainly related to an approximately $9.5 billion increase in net purchase and sales of short-term and other investments. Capital expenditures increased by $2.7 billion in 2022, as compared to 2021, and totaled $4.8 billion attributable to the purchase of aircraft and aircraft spare parts, advance deposits for future aircraft purchases and spend on facility and technology related projects. Capital expenditures for 2021 were $2.1 billion and were primarily attributable to advance deposits for future aircraft purchases.

Financing Activities. Significant financing events in 2022 were as follows:

Debt, Finance Lease and Other Financing Liability Principal Payments. During 2022, the Company made $4.0 billion of principal payments on debt, finance leases, and other financing liabilities.

Debt Issuances. During 2022, United borrowed $0.8 billion for aircraft financings.

See Note 9 to the financial statements included in Part II, Item 8 of this report for additional information.

Significant financing events in 2021 were as follows:

Debt, Finance Lease and Other Financing Liability Principal Payments. During 2021, the Company made $5.2 billion in principal payments for debt, finance leases, and other financing liabilities. The Company:

•repaid in full $1.4 billion aggregate principal amount outstanding under a 2017 term loan facility;

•repaid in full $1.0 billion aggregate principal amount outstanding under a 2017 revolving credit facility;

•repaid in full $520 million aggregate principal amount outstanding under a CARES Act loan; and

•made $1.9 billion of aircraft-related debt principal payments.

Debt Issuances. During 2021, United received and recorded:

44

Table of Contents

•$5.0 billion from a new term loan;

•$4.0 billion from the issuance of 4.375% senior secured notes due 2026 and 4.625% senior secured notes due 2029;

•$1.7 billion from senior unsecured notes under the Payroll Support Program Extension Agreements of the CARES Act; and

•$600 million of proceeds as debt from the enhanced equipment trust certificates pass-through trusts established in February 2021.

Share Issuances. During 2021, the Company raised approximately $532 million in net cash proceeds from the issuance and sale of UAL common stock through "at the market offerings" under equity distribution agreements entered into in June 2020 and March 2021.

For additional information regarding these Liquidity and Capital Resource matters, see Notes 2, 9, 10 and 12 to the financial statements included in Part II, Item 8 of this report. For information regarding non-cash investing and financing activities, see the Company's statements of consolidated cash flows. For a discussion of the Company's sources and uses of cash in 2021 as compared to 2020, see "Liquidity and Capital Resources" in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2021 Annual Report.

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

[[GREPCENT_TABLE]]
[["","S&P","","Moody's","","Fitch"],["UAL","B+","","Ba2","","B+"],["United","B+","","*","","B+"],["*The credit agency does not issue corporate credit ratings for subsidiary entities."]]
[[/GREPCENT_TABLE]]

These credit ratings are below investment grade levels; however, the Company has been able to secure financing with investment grade credit ratings for certain EETCs, term loans and secured bond financings. Downgrades from these rating levels, among other things, could restrict the availability, or increase the cost, of future financing for the Company as well as affect the fair market value of existing debt. A rating reflects only the view of a rating agency and is not a recommendation to buy, sell or hold securities. Ratings can be revised upward or downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change.

Other Liquidity Matters

Below is a summary of additional liquidity matters. See the indicated notes to our consolidated financial statements included in Part II, Item 8 of this report for additional details related to these and other matters affecting our liquidity and commitments.

[[GREPCENT_TABLE]]
[["Pension and other postretirement plans","Note 7"],["Long-term debt and debt covenants","Note 9"],["Leases and capacity purchase agreements","Note 10"],["Commitments and contingencies","Note 12"]]
[[/GREPCENT_TABLE]]

The Company's business is capital intensive, requiring significant amounts of capital to fund the acquisition of assets, particularly aircraft. In the past, the Company has funded the acquisition of aircraft with cash, by using EETC financing, by entering into finance or operating leases, or through other financings. The Company also often enters into long-term lease commitments with airports to ensure access to terminal, cargo, maintenance and other required facilities.

The table below provides a summary of the Company's current and long-term material cash requirements as of December 31, 2022 (in billions):

45

Table of Contents

[[GREPCENT_TABLE]]
[["","","2023","","2024","","2025","","2026","","2027","","After 2027"],["Long-term debt (a)","","$","2.9","","","$","3.9","","","$","3.4","","","$","5.2","","","$","2.4","","","$","13.7"],["Finance leases\u2014principal portion","","0.1","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Interest on debt and finance leases (b)","","1.7","","","1.4","","","1.2","","","1.0","","","0.8","","","0.9"],["Operating leases (c)","","0.9","","","0.7","","","0.6","","","0.6","","","0.8","","","3.2"],["Leases not yet commenced (d)","","0.2","","","0.3","","","0.4","","","0.4","","","0.4","","","1.5"],["Other financial liabilities","","0.1","","","0.1","","","0.1","","","0.1","","","0.4","","","0.4"],["Regional CPAs (e)","","2.2","","","1.9","","","1.5","","","1.3","","","0.9","","","3.2"],["Postretirement benefit payments (f)","","0.1","","","0.1","","","0.1","","","0.1","","","0.1","","","0.3"],["Pension funding (g)","","\u2014","","","\u2014","","","0.1","","","0.4","","","0.2","","","0.5"],["Capital and other purchases (h)","","10.2","","","8.0","","","7.8","","","5.9","","","5.0","","","16.6"],["Total","","$","18.4","","","$","16.4","","","$","15.2","","","$","15.0","","","$","11.0","","","$","40.3"]]
[[/GREPCENT_TABLE]]

(a)Long-term debt presented in the Company's financial statements is net of $386 million of debt discount, premiums and debt issuance costs which are being amortized over the debt terms. Cash requirements do not include the debt discount, premiums and debt issuance costs.

(b)Future interest payments on variable rate debt were computed using the rates as of December 31, 2022.

(c)Represents future payments under fixed rate operating lease obligations. See Note 10 to the financial statements included in Part II, Item 8 of this report for information on variable rate and short-term operating leases.

(d)Represents future payments under leases that have not yet commenced and are not included in the consolidated balance sheet. See Note 10 to the financial statements included in Part II, Item 8 of this report for information on these leases.

(e)Represents our estimates of future minimum noncancelable commitments under our CPAs and does not include the portion of the underlying obligations for aircraft and facility rent that is disclosed as part of operating lease obligations. Amounts also exclude a portion of United's finance lease obligations recorded for certain of its CPAs. See Note 10 to the financial statements included in Part II, Item 8 of this report for the significant assumptions used to estimate the payments.

(f)Amounts represent postretirement benefit payments through 2032. Benefit payments approximate plan contributions as plans are substantially unfunded.

(g)Represents an estimate of the minimum funding requirements as determined by government regulations for United's U.S. pension plans. Amounts are subject to change based on numerous assumptions, including the performance of assets in the plans and bond rates.

(h)Represents contractual commitments for firm order aircraft, spare engines and other capital purchase commitments. See Note 12 to the financial statements included in Part II, Item 8 of this report for a discussion of our purchase commitments.

In addition to the material cash requirements discussed above, the Company has made certain guarantees that could have a material future effect on the Company's cash requirements:

Letters of Credit and Surety Bonds. As of December 31, 2022, United had approximately $441 million of letters of credit and surety bonds securing various obligations with expiration dates through 2032. Certain of these amounts are cash collateralized and reported within Restricted cash on our statement of financial position. See Note 12 to the financial statements included in Part II, Item 8 of this report for more information related to these letters of credit and surety bonds.

Guarantee of Debt of Others. As of December 31, 2022, United is the guarantor of $92 million of aircraft mortgage debt issued by one of United's regional carriers. The aircraft mortgage debt is subject to increased cost provisions and the Company would potentially be responsible for those costs under the guarantees. The increased cost provisions in the $92 million of aircraft mortgage debt are similar to those in certain of the Company's debt agreements. See discussion under Increased Cost Provisions, below, for additional information on increased cost provisions related to the Company's debt.

Fuel Consortia. United participates in numerous fuel consortia with other air carriers at major airports to reduce the costs of fuel distribution and storage. Interline agreements govern the rights and responsibilities of the consortia members and provide for the allocation of the overall costs to operate the consortia based on usage. The consortia (and in limited cases, the participating carriers) have entered into long-term agreements to lease certain airport fuel storage and distribution facilities that are typically financed through tax-exempt bonds, either special facilities lease revenue bonds or general airport revenue bonds, issued by various local municipalities. In general, each consortium lease agreement requires the consortium to make lease payments in amounts sufficient to pay the maturing principal and interest payments on the bonds. As of December 31, 2022, approximately $2.5 billion principal amount of such bonds was secured by significant fuel facility leases in which United participates, as to which United and each of the signatory airlines has provided indirect guarantees of the debt. As of December 31, 2022, the Company's contingent exposure was approximately $400 million principal amount of such bonds based on its recent consortia participation. The Company's contingent exposure could increase if the participation of other air carriers decreases. The guarantees will expire when the tax-exempt bonds are paid in full, which ranges from 2023 to 2056. The Company concluded it was not necessary to record a liability for these indirect guarantees.

46

Table of Contents

Increased Cost Provisions. In United's financing transactions that include loans in which United is the borrower, United typically agrees to reimburse lenders for any reduced returns with respect to the loans due to any change in capital requirements and, in the case of loans with respect to which the interest rate is based on LIBOR or SOFR, 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 December 31, 2022, the Company had $12.9 billion of floating rate debt with remaining terms of up to 12 years that are subject to these increased cost provisions. In several financing transactions involving loans or leases from non-U.S. entities, with remaining terms of up to 12 years and an aggregate balance of $9.8 billion, the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder to non-U.S. entities to withholding taxes, subject to customary exclusions.

Critical Accounting Policies

Critical accounting policies are defined as those that are affected by significant judgments and uncertainties which potentially could result in materially different accounting under different assumptions and conditions. The Company has prepared the financial statements in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates under different assumptions or conditions. The Company has identified the following critical accounting policies that impact the preparation of the financial statements.

Revenue Recognition. Passenger revenue is recognized when transportation is provided. Passenger tickets and related ancillary services sold by the Company for flights are purchased primarily via credit card transactions, with payments collected by the Company in advance of the performance of related services. The Company initially records ticket sales in its Advance ticket sales liability, deferring revenue recognition until the travel occurs. For travel that has more than one flight segment, the Company deems each segment as a separate performance obligation and recognizes revenue for each segment as travel occurs. Tickets sold by other airlines where the Company provides the transportation are recognized as passenger revenue at the estimated value to be billed to the other airline when travel is provided. Differences between amounts billed and the actual amounts may be rejected and rebilled or written off if the amount recorded was different from the original estimate. When necessary, the Company records a reserve against its billings and payables with other airlines based on historical experience.

The Company sells certain tickets with connecting flights with one or more segments operated by its other airline partners. For segments operated by its other airline partners, the Company has determined that it is acting as an agent on behalf of the other airlines as they are responsible for their portion of the contract (i.e. transportation of the passenger). The Company, as the agent, recognizes revenue within Other operating revenue at the time of the travel for the net amount representing commission to be retained by the Company for any segments flown by other airlines.

Advance ticket sales represent the Company's liability to provide air transportation in the future. All tickets sold at any given point in time have travel dates through the next 12 months. The Company defers amounts related to future travel in its Advance ticket sales liability account. The Company's Advance ticket sales liability also includes credits issued to customers for future flights ("FFCs") and electronic travel certificates ("ETCs"), primarily for ticket cancellations, which can be applied towards a purchase of a new ticket. FFCs and ETCs are valid up to one year from the date of issuance; however, all credits issued on or before December 31, 2022 have been extended to December 31, 2023.

The Company estimates the value of Advance ticket sales that will expire unused ("breakage") and recognizes revenue in proportion to the usage of the related tickets. To determine breakage, the Company uses its historical experience with expired tickets and certificates and other facts, such as recent aging trends, program changes and modifications that could affect the ultimate expiration patterns. Given the uncertainty of travel demand caused by the COVID-19 pandemic, changes in our estimates of FFCs and ETCs that may expire unused could have a material impact on revenue. Changes in estimates of breakage are recognized prospectively in proportion to the remaining usage of the related tickets.

Frequent Flyer Accounting. United's MileagePlus loyalty 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 goods and services from our network of non-airline partners. We have contracts to sell miles to these partners with the terms extending from one to seven 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 travel and non-travel awards.

Co-Brand Agreement. United has a contract (the "Co-Brand Agreement") to sell MileagePlus miles to its co-branded credit card partner Chase. Chase awards miles to MileagePlus members based on their credit card activity. United identified the following significant separately identifiable performance obligations in the Co-Brand Agreement:

47

Table of Contents

•MileagePlus miles awarded – United has a performance obligation to provide MileagePlus cardholders with miles to be used for air travel and non-travel award redemptions. The Company records Passenger revenue related to the travel awards when the transportation is provided and records Other revenue related to the non-travel awards when the goods or services are delivered. The Company records the cost associated with non-travel awards in Other operating revenue, as an agent.

•Marketing – United has a performance obligation to provide Chase access to United's customer list and the use of United's brand. Marketing revenue is recorded to Other operating revenue as miles are delivered to Chase.

•Advertising – United has a performance obligation to provide advertising in support of the MileagePlus card in various customer contact points such as United's website, email promotions, direct mail campaigns, airport advertising and in-flight advertising. Advertising revenue is recorded to Other operating revenue as miles are delivered to Chase.

•Other travel-related benefits – United'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.

We account for all the payments received under the Co-Brand Agreement by allocating them to the separately identifiable performance obligations. The fair value of the separately identifiable performance obligations is determined using management's estimated selling price of each component. The objective of using the estimated selling price based methodology is to determine the price at which we would transact a sale if the product or service were sold on a stand-alone basis. Accordingly, we determine our best estimate of selling price by considering multiple inputs and methods including, but not limited to, discounted cash flows, brand value, volume discounts, published selling prices, number of miles awarded and number of miles redeemed. The Company estimated the selling prices and volumes over the term of the Co-Brand Agreement, at the inception of the contract, in order to determine the allocation of proceeds to each of the components to be delivered. We also evaluate volumes on an annual basis, which may result in a change in the allocation of the estimated consideration from the Co-Brand Agreement on a prospective basis.

Indefinite-lived intangible assets. The Company has indefinite-lived intangible assets, including goodwill. Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment on an annual basis as of October 1, or on an interim basis whenever a triggering event occurs. An impairment occurs when the fair value of an intangible asset is less than its carrying value. The Company determines the fair value using a variation of the income approach known as the excess earnings method, which discounts an asset's projected future net cash flows to determine the current fair value. Assumptions used in the discounted cash flow methodology include a discount rate, which is based upon the Company's current weighted average cost of capital plus an asset-specific risk factor, and a projection of sales, expenses, gross margin, tax rates and contributory asset charges for several future years and a terminal growth rate. The assumptions used for future projections are determined based upon the Company's asset-specific forecasts along with the Company's strategic plan. These assumptions are inherently uncertain as they relate to future events and circumstances. Actual results will be influenced by the competitive environment, fuel costs and other expenses, and potentially other unforeseen events or circumstances that could have a material impact on future results.

In 2022, the Company evaluated its intangible assets for possible impairments. For the Company's China route authority, the Company performed a quantitative assessment which involved determining the fair value of the asset and comparing that amount to the asset's carrying value. For all other intangible assets, the Company performed a qualitative assessment of whether it was more likely than not that an impairment had occurred. To determine fair value, the Company used discounted cash flow methods appropriate for each asset. Key inputs into the models included forecasted capacity, revenues, fuel costs, other operating costs and an overall discount rate. The assumptions used for future projections include that demand will continue to recover. These assumptions are inherently uncertain as they relate to future events and circumstances.

See Notes 1 and 13 to the financial statements included in Part II, Item 8 of this report for additional information.

Tax valuation allowance. A tax valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company's management assesses available positive and negative evidence regarding the Company's ability to realize its deferred tax assets and records a valuation allowance when it is more likely than not that deferred tax assets will not be realized. In order to form a conclusion, management considers positive evidence in the form of taxable income in prior carryback years, reversing temporary differences, tax planning strategies and projections of future taxable income during the periods in which those temporary differences become deductible, as well as negative evidence such as historical losses. Although the Company incurred losses in 2021 and 2020, management determined that these results were not indicative of future results due to the impact of the COVID-19 pandemic on its operations. The Company concluded that the positive evidence outweighs the negative evidence, primarily driven by approval and distribution of COVID-19 vaccines as well as increased confidence with the timing of the recovery, as evidenced in our 2022 return to profitability. The Company has $7.5 billion of deferred tax assets, of which $2.8 billion (tax effected) are attributable to federal net operating

48

Table of Contents

losses ("NOLs") at December 31, 2022. The majority of the NOLs do not expire and the Company expects to realize the benefits of the NOLs and other deferred tax assets through the reversal of certain existing deferred tax liabilities of $6.7 billion and the remaining $0.8 billion through projected future taxable income. Assumptions about our future taxable income are consistent with the plans and estimates used to manage our business. Therefore, we have not recorded a valuation allowance on our deferred tax assets other than the capital loss carryforwards and certain state attributes that have short expiration periods. While the Company expects to generate sufficient future income to fully utilize its deferred tax assets (including NOLs), the Company may have to record a valuation allowance, which could be material, against deferred tax assets if negative evidence such as reduced forecasted income outweigh positive evidence.

Recording a valuation allowance against our NOLs would not impact our ability to use them to offset cash taxes payable. However, our ability to use NOLs may be significantly limited due to various circumstances, as discussed in more detail in Part I, Item 1A. Risk Factors—"The Company's ability to use its net operating loss carryforwards and certain other tax attributes to offset future taxable income for U.S. federal income tax purposes may be significantly limited due to various circumstances, including certain possible future transactions involving the sale or issuance of UAL common stock, or if taxable income does not reach sufficient levels."

As of December 31, 2022, the Company has recorded $175 million of valuation allowance against its capital loss deferred tax assets. Capital losses have a limited carryforward period of five years, and they can be utilized only to the extent of capital gains. The Company does not anticipate generating sufficient capital gains to utilize the losses before they expire, therefore, a valuation allowance is necessary as of December 31, 2022. Additionally, the Company recorded a valuation allowance of $24 million on certain state deferred tax assets primarily due to state NOLs that have short expiration periods.

Supplemental Information

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

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

Below is a reconciliation of the historical non-GAAP financial measure provided in this report (CASM-ex) to the most directly comparable GAAP financial measure (CASM) for the years ended December 31:

[[GREPCENT_TABLE]]