UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20202021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
ual-20210630_g1.jpg
Commission
File Number
Exact Name of Registrant as Specified in its Charter,
Principal Executive Office Address and Telephone Number
State of
Incorporation		I.R.S. Employer
Identification No.
001-06033United Airlines Holdings, Inc.Delaware36-2675207
233 South Wacker Drive,Chicago,Illinois60606
(872)825-4000
Commission
File Number
Exact Name of Registrant as Specified in its Charter,
Principal Executive Office Address and Telephone Number
State of
Incorporation
I.R.S. Employer
Identification No.
001-06033001-10323United Airlines, Holdings, Inc.Delaware36-267520774-2099724
233 South Wacker Drive,Chicago,Illinois60606
(872)825-4000
001-10323United Airlines, Inc.Delaware74-2099724
233 South Wacker Drive,Chicago,Illinois60606
(872)825-4000
(872)825-4000
Securities registered pursuant to Section 12(b) of the Act
RegistrantTitle of Each ClassTrading SymbolName of Each Exchange on Which Registered
United Airlines Holdings, Inc.Common Stock,$0.01 $0.01 par valueUALThe Nasdaq Stock Market LLC
United Airlines Holdings, Inc.Preferred Stock Purchase RightsNoneThe Nasdaq Stock Market LLC
United Airlines, Inc.NoneNoneNone
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
United Airlines Holdings, Inc.Yes☒No☐United Airlines, Inc.Yes☒No☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
United Airlines Holdings, Inc.Yes☒No☐United Airlines, Inc.Yes☒No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
United Airlines 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☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
United Airlines Holdings, Inc.☐
United Airlines, Inc.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
United Airlines Holdings, Inc.��Yes☐No☒
United Airlines, Inc.Yes☐No☒
The number of shares outstanding of each of the issuer's classes of common stock as of July 17, 202014, 2021 is shown below:
United Airlines Holdings, Inc.290,983,657323,612,861 
shares of common stock ($0.01 par value)
United Airlines, Inc.1,000
shares of common stock ($0.01 par value) (100% owned by United Airlines Holdings, Inc.)
OMISSION OF CERTAIN INFORMATION
This combined Quarterly Report on Form 10-Q is separately filed by United Airlines Holdings, Inc. and United Airlines, Inc. United Airlines, Inc. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format allowed under that General Instruction.



United Airlines Holdings, Inc.
United Airlines, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended June 30, 20202021

Table of Contents
 
Page
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
United Airlines Holdings, Inc.:
Statements of Consolidated Operations
3
Statements of Consolidated Comprehensive Income (Loss)
4
Consolidated Balance Sheets
5
Condensed Statements of Consolidated Cash Flows
7
Statement of Consolidated Stockholders' Equity
8
United Airlines, Inc.:
Statements of Consolidated Operations
9
Statements of Consolidated Comprehensive Income (Loss)
10
Consolidated Balance Sheets
11
Condensed Statements of Consolidated Cash Flows
13
Statement of Consolidated Stockholder's Equity
14
Combined Notes to Condensed Consolidated Financial Statements
(United Airlines Holdings, Inc. and United Airlines, Inc.)
15
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
3129
Item 3. Quantitative and Qualitative Disclosures About Market Risk
4441
Item 4. Controls and Procedures
4441
Item 1. Legal Proceedings
4542
Item 1A. Risk Factors
4542
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
5460
Item 6. Exhibits
5561
Exhibit Index
5561
5763




PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

UNITED AIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Operating revenue: 
Passenger revenue$4,366 $681 $6,682 $7,746 
Cargo606 402 1,103 666 
Other operating revenue499 392 907 1,042 
Total operating revenue5,471 1,475 8,692 9,454 
Operating expense:
Salaries and related costs2,276 2,170 4,500 5,125 
Aircraft fuel1,232 240 2,083 1,966 
Depreciation and amortization620 618 1,243 1,233 
Landing fees and other rent564 429 1,083 1,052 
Regional capacity purchase547 388 1,026 1,125 
Aircraft maintenance materials and outside repairs302 110 571 544 
Distribution expenses139 31 224 326 
Aircraft rent52 47 107 97 
Special charges (credits)(948)(1,449)(2,325)(1,386)
Other operating expenses957 528 1,831 1,981 
Total operating expense5,741 3,112 10,343 12,063 
Operating loss(270)(1,637)(1,651)(2,609)
Nonoperating income (expense):
Interest expense(426)(196)(779)(367)
Interest capitalized22 17 39 38 
Interest income12 11 19 37 
Unrealized gains (losses) on investments, net147 9 125 (310)
Miscellaneous, net(49)(207)(68)(906)
Total nonoperating expense, net(294)(366)(664)(1,508)
Loss before income tax benefit(564)(2,003)(2,315)(4,117)
Income tax benefit(130)(376)(524)(786)
Net loss$(434)$(1,627)$(1,791)$(3,331)
Loss per share, basic and diluted$(1.34)$(5.79)$(5.60)$(12.59)
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Operating revenue:       
Passenger revenue$681
 $10,486
 $7,746
 $19,211
Cargo402
 295
 666
 581
Other operating revenue392
 621
 1,042
 1,199
Total operating revenue1,475
 11,402
 9,454
 20,991
        
Operating expense:       
Salaries and related costs2,170
 3,057
 5,125
 5,930
Aircraft fuel240
 2,385
 1,966
 4,408
Regional capacity purchase388
 715
 1,125
 1,403
Landing fees and other rent429
 660
 1,052
 1,248
Depreciation and amortization618
 560
 1,233
 1,107
Aircraft maintenance materials and outside repairs110
 421
 544
 829
Distribution expenses31
 442
 326
 802
Aircraft rent47
 73
 97
 154
Special charges (credit)(1,449) 71
 (1,386) 89
Other operating expenses528
 1,546
 1,981
 3,054
Total operating expenses3,112
 9,930
 12,063
 19,024
Operating income (loss)(1,637) 1,472
 (2,609) 1,967
        
Nonoperating income (expense):       
Interest expense(196) (191) (367) (379)
Interest capitalized17
 21
 38
 43
Interest income11
 38
 37
 67
Unrealized gains (losses) on investments, net9
 34
 (310) 51
Miscellaneous, net(207) (20) (906) (28)
Total nonoperating expense, net(366) (118) (1,508) (246)
Income (loss) before income taxes(2,003) 1,354
 (4,117) 1,721
Income tax expense (benefit)(376) 302
 (786) 377
Net income (loss)$(1,627) $1,052
 $(3,331) $1,344
Earnings (loss) per share, basic$(5.79) $4.03
 $(12.59) $5.09
Earnings (loss) per share, diluted$(5.79) $4.02
 $(12.59) $5.07



The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.


3

UNITED AIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In millions)

 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Net income (loss)$(1,627) $1,052
 $(3,331) $1,344
        
Other comprehensive income (loss), net of tax:       
Employee benefit plans(501) (17) (542) (10)
Investments and other13
 3
 1
 6
Total other comprehensive income (loss), net of tax(488) (14) (541) (4)
        
Total comprehensive income (loss), net$(2,115) $1,038
 $(3,872) $1,340


 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net loss$(434)$(1,627)$(1,791)$(3,331)
Other comprehensive income (loss), net of tax:
Employee benefit plans12 (501)26 (542)
Investments and other0 13 (1)1 
Total other comprehensive income (loss), net of tax12 (488)25 (541)
Total comprehensive loss, net$(422)$(2,115)$(1,766)$(3,872)


The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.



4

UNITED AIRLINES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
 
June 30, 2020 December 31, 2019 June 30, 2021December 31, 2020
ASSETS   ASSETS
Current assets:   Current assets:
Cash and cash equivalents$6,505
 $2,762
Cash and cash equivalents$20,838 $11,269 
Short-term investments958
 2,182
Short-term investments230 414 
Receivables, less allowance for credit losses (2020 — $11; 2019 — $9)857
 1,364
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2020 — $464; 2019 — $425)955
 1,072
Restricted cashRestricted cash254 255 
Receivables, less allowance for credit losses (2021 — $71; 2020 — $78)Receivables, less allowance for credit losses (2021 — $71; 2020 — $78)1,793 1,295 
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2021 — $518; 2020 — $478)Aircraft fuel, spare parts and supplies, less obsolescence allowance (2021 — $518; 2020 — $478)912 932 
Prepaid expenses and other766
 814
Prepaid expenses and other646 635 
Total current assets10,041
 8,194
Total current assets24,673 14,800 
Operating property and equipment:   Operating property and equipment:
Flight equipment37,339
 35,421
Flight equipment39,109 38,218 
Other property and equipment8,350
 7,926
Other property and equipment8,683 8,511 
Purchase deposits for flight equipment1,624
 1,360
Purchase deposits for flight equipment1,980 1,166 
Total operating property and equipment47,313
 44,707
Total operating property and equipment49,772 47,895 
Less — Accumulated depreciation and amortization(15,578) (14,537)Less — Accumulated depreciation and amortization(17,441)(16,429)
Total operating property and equipment, net31,735
 30,170
Total operating property and equipment, net32,331 31,466 
   
Operating lease right-of-use assets4,738
 4,758
Operating lease right-of-use assets4,421 4,537 
   
Other assets:   Other assets:
Goodwill4,523
 4,523
Goodwill4,527 4,527 
Intangibles, less accumulated amortization (2020 — $1,467; 2019 — $1,440)2,852
 3,009
Intangibles, less accumulated amortization (2021 — $1,519; 2020 — $1,495)Intangibles, less accumulated amortization (2021 — $1,519; 2020 — $1,495)2,827 2,838 
Restricted cash73
 106
Restricted cash216 218 
Notes receivable, less allowance for credit losses (2020 — $553)141
 671
Investments in affiliates and other, net798
 1,180
Deferred income taxesDeferred income taxes647 131 
Investments in affiliates and other, less allowance for credit losses (2021 — $606; 2020 — $522)Investments in affiliates and other, less allowance for credit losses (2021 — $606; 2020 — $522)1,407 1,031 
Total other assets8,387
 9,489
Total other assets9,624 8,745 
Total assets$54,901
 $52,611
Total assets$71,049 $59,548 
(continued on next page)

















5


UNITED AIRLINES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
 June 30, 2021December 31, 2020
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$2,218 $1,595 
Accrued salaries and benefits2,228 1,960 
Advance ticket sales6,960 4,833 
Frequent flyer deferred revenue2,099 908 
Current maturities of long-term debt1,881 1,911 
Current maturities of operating leases583 612 
Current maturities of finance leases144 182 
Payroll Support Program deferred credit1,132 0 
Other819 724 
Total current liabilities18,064 12,725 
Long-term debt32,303 24,836 
Long-term obligations under operating leases4,920 4,986 
Long-term obligations under finance leases250 224 
Other liabilities and deferred credits:
Frequent flyer deferred revenue4,086 5,067 
Pension liability2,501 2,460 
Postretirement benefit liability988 994 
Other financial liabilities from sale-leasebacks1,683 1,140 
Other1,350 1,156 
Total other liabilities and deferred credits10,608 10,817 
Commitments and contingencies00
Stockholders' equity:
Preferred stock0 0 
Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 323,610,765 and 311,845,232 shares at June 30, 2021 and December 31, 2020, respectively4 4 
Additional capital invested9,042 8,366 
Stock held in treasury, at cost(3,832)(3,897)
Retained earnings804 2,626 
Accumulated other comprehensive loss(1,114)(1,139)
Total stockholders' equity4,904 5,960 
Total liabilities and stockholders' equity$71,049 $59,548 
 June 30, 2020 December 31, 2019
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
Advance ticket sales$4,950
 $4,819
Accounts payable1,725
 2,703
Frequent flyer deferred revenue840
 2,440
Accrued salaries and benefits1,669
 2,271
Current maturities of long-term debt4,454
 1,407
Current maturities of finance leases93
 46
Current maturities of operating leases598
 686
Payroll Support Program deferred credit1,508
 —
Other558
 566
Total current liabilities16,395
 14,938
    
Long-term debt14,318
 13,145
Long-term obligations under finance leases316
 220
Long-term obligations under operating leases5,113
 4,946
    
Other liabilities and deferred credits:   
Frequent flyer deferred revenue4,830
 2,836
Postretirement benefit liability957
 789
Pension liability2,221
 1,446
Deferred income taxes804
 1,736
Other1,430
 1,024
Total other liabilities and deferred credits10,242
 7,831
Commitments and contingencies

 

Stockholders' equity:   
Preferred stock—
 —
Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 290,982,216 and 251,216,381 shares at June 30, 2020 and December 31, 2019, respectively3
 3
Additional capital invested7,307
 6,129
Retained earnings6,365
 9,716
Stock held in treasury, at cost(3,899) (3,599)
Accumulated other comprehensive loss(1,259) (718)
Total stockholders' equity8,517
 11,531
Total liabilities and stockholders' equity$54,901
 $52,611


The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.




6

UNITED AIRLINES HOLDINGS, INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In millions)
 Six Months Ended June 30,
 20212020
Cash Flows from Operating Activities:
Net cash provided by (used in) operating activities$3,122 $(67)
Cash Flows from Investing Activities:
Capital expenditures, net of flight equipment purchase deposit returns(1,305)(1,998)
Purchases of short-term investments0 (550)
Proceeds from sale of short-term investments184 1,774 
Other, net11 14 
Net cash used in investing activities(1,110)(760)
Cash Flows from Financing Activities:
Proceeds from issuance of debt, net of discounts and fees11,116 4,371 
Proceeds from equity issuance532 1,135 
Payments of long-term debt, finance leases and other financing liabilities(4,072)(564)
Repurchases of common stock0 (353)
Other, net(22)(18)
Net cash provided by financing activities7,554 4,571 
Net increase in cash, cash equivalents and restricted cash9,566 3,744 
Cash, cash equivalents and restricted cash at beginning of the period11,742 2,868 
Cash, cash equivalents and restricted cash at end of the period (a)$21,308 $6,612 
Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through the issuance of debt, finance leases and other$761 $626 
Lease modifications and lease conversions59 470 
Right-of-use assets acquired through operating leases214 48 
Notes receivable and warrants received for entering into agreements139 0 
 Six Months Ended June 30,
 2020 2019
Cash Flows from Operating Activities:   
Net cash provided (used) by operating activities$(67) $4,625
    
Cash Flows from Investing Activities:   
Capital expenditures, net of returns of purchase deposits on flight equipment(1,998) (2,467)
Purchases of short-term and other investments(550) (1,443)
Proceeds from sale of short-term and other investments1,774
 1,484
Other, net14
 (10)
Net cash used in investing activities(760) (2,436)
    
Cash Flows from Financing Activities:   
Proceeds from issuance of short-term debt2,750
 —
Proceeds from issuance of long-term debt1,669
 996
Proceeds from equity issuance1,135
 —
Payments of long-term debt(523) (473)
Repurchases of common stock(353) (1,062)
Principal payments under finance leases(41) (63)
Capitalized financing costs(48) (30)
Other, net(18) (30)
Net cash provided (used) in financing activities4,571
 (662)
Net increase in cash, cash equivalents and restricted cash3,744
 1,527
Cash, cash equivalents and restricted cash at beginning of the period2,868
 1,799
Cash, cash equivalents and restricted cash at end of the period (a)$6,612
 $3,326
    
Investing and Financing Activities Not Affecting Cash:   
Property and equipment acquired through the issuance of debt$327
 $220
Property and equipment acquired through other financial liabilities280
 —
Lease modifications and lease conversions470
 36
Right-of-use assets acquired through operating leases48
 99
Property and equipment acquired through finance leases19
 8


(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:
Current assets:
Cash and cash equivalents$20,838 $6,505 
Restricted cash — Current254 34 
Restricted cash — Non-Current216 73 
Total cash, cash equivalents and restricted cash$21,308 $6,612 
Cash and cash equivalents$6,505
 $3,221
Restricted cash (included in Prepaid expenses and other)34
 —
Restricted cash73
 105
Total cash, cash equivalents and restricted cash$6,612
 $3,326


The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
7

UNITED AIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (UNAUDITED)
(In millions)
 Common
Stock		Additional
Capital Invested		Treasury StockRetained EarningsAccumulated
Other Comprehensive Income (Loss)		Total
SharesAmount
Balance at March 31, 2021323.6 $4 $8,923 $(3,834)$1,239 $(1,126)$5,206 
Net loss— — — — (434)— (434)
Other comprehensive income— — — — — 12 12 
Stock settled share-based compensation— — 68 — — — 68 
Warrants issued— — 52 — — — 52 
Stock issued for share-based awards, net of shares withheld for tax— — (1)2 (1)— 0 
Balance at June 30, 2021323.6 $4 $9,042 $(3,832)$804 $(1,114)$4,904 
Balance at December 31, 2020311.8$4 $8,366 $(3,897)$2,626 $(1,139)$5,960 
Net loss— — — — (1,791)— (1,791)
Other comprehensive income— — — — — 25 25 
Stock settled share-based compensation— — 100 — — — 100 
Issuance of common stock11.0 — 532 — — — 532 
Warrants issued— — 99 — — — 99 
Stock issued for share-based awards, net of shares withheld for tax0.8 — (55)65 (31)— (21)
Balance at June 30, 2021323.6 $4 $9,042 $(3,832)$804 $(1,114)$4,904 
Balance at March 31, 2020247.3 $3 $6,096 $(3,901)$7,991 $(771)$9,418 
Net loss— — — — (1,627)— (1,627)
Other comprehensive loss— — — — — (488)(488)
Stock settled share-based compensation— — 20 — — — 20 
Issuance of common stock43.7 — 1,135 — — — 1,135 
Warrants issued— — 57 — — — 57 
Stock issued for share-based awards, net of shares withheld for tax— — (1)2 1 — 2 
Balance at June 30, 2020291.0 $3 $7,307 $(3,899)$6,365 $(1,259)$8,517 
Balance at December 31, 2019251.2 $3 $6,129 $(3,599)$9,716 $(718)$11,531 
Net loss— — — — (3,331)— (3,331)
Other comprehensive loss— — — — — (541)(541)
Stock settled share-based compensation— — 42 — — — 42 
Issuance of common stock43.7 — 1,135 — — — 1,135 
Repurchases of common stock(4.4)— — (342)— — (342)
Warrants issued— — 57 — — — 57 
Stock issued for share-based awards, net of shares withheld for tax0.5 — (56)42 (3)— (17)
Adoption of new accounting standard (a)— — — — (17)— (17)
Balance at June 30, 2020291.0 $3 $7,307 $(3,899)$6,365 $(1,259)$8,517 
 
Common
Stock
 
Additional
Capital Invested
 Treasury Stock Retained Earnings 
Accumulated
Other Comprehensive Loss
 Total
 Shares Amount     
Balance at March 31, 2020247.3
 $3
 $6,096
 $(3,901) $7,991
 $(771) $9,418
Net loss—
 —
 —
 —
 (1,627) —
 (1,627)
Other comprehensive loss—
 —
 —
 —
 —
 (488) (488)
Stock settled share-based compensation—
 —
 20
 —
 —
 —
 20
Sale of common stock43.7
 —
 1,135
 —
 —
 —
 1,135
Warrants issued—
 —
 57
 —
 —
 —
 57
Net treasury stock issued for share-based awards—
 —
 (1) 2
 1
 —
 2
Balance at June 30, 2020291.0
 $3
 $7,307
 $(3,899) $6,365
 $(1,259) $8,517
              
Balance at December 31, 2019251.2
 $3
 $6,129
 $(3,599) $9,716
 $(718) $11,531
Net loss—
 —
 —
 —
 (3,331) —
 (3,331)
Other comprehensive loss—
 —
 —
 —
 —
 (541) (541)
Stock settled share-based compensation—
 —
 42
 —
 —
 —
 42
Sale of common stock43.7
 —
 1,135
 —
 —
 —
 1,135
Repurchases of common stock(4.4) —
 —
 (342) —
 —
 (342)
Net treasury stock issued for share-based awards0.5
 —
 (56) 42
 (3) —
 (17)
Warrants issued—
 —
 57
 —
 —
 —
 57
Adoption of new accounting standard (a)—
 —
 —
 —
 (17) —
 (17)
Balance at June 30, 2020291.0
 $3
 $7,307
 $(3,899) $6,365

$(1,259) $8,517
              
Balance at March 31, 2019264.3
 $3
 $6,080
 $(2,487) $6,999
 $(793) $9,802
Net income—
 —
 —
 —
 1,052
 —
 1,052
Other comprehensive income—
 —
 —
 —
 —
 (14) (14)
Stock settled share-based compensation—
 —
 17
 —
 —
 —
 17
Repurchases of common stock(6.6) —
 —
 (536) —
 —
 (536)
Net treasury stock issued for share-based awards—
 —
 (1) 1
 (1) —
 (1)
Balance at June 30, 2019257.7
 $3
 $6,096
 $(3,022) $8,050
 $(807) $10,320
              
Balance at December 31, 2018269.9
 $3
 $6,120
 $(1,993) $6,715
 $(803) $10,042
Net income—
 —
 —
 —
 1,344
 —
 1,344
Other comprehensive income—
 —
 —
 —
 —
 (4) (4)
Stock settled share-based compensation—
 —
 31
 —
 —
 —
 31
Repurchases of common stock(12.7) —
 —
 (1,063) —
 —
 (1,063)
Net treasury stock issued for share-based awards0.5
 —
 (55) 34
 (9) —
 (30)
Balance at June 30, 2019257.7
 $3
 $6,096
 $(3,022) $8,050
 $(807) $10,320

(a) Transition adjustment due to the adoption of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses. See Note 1 to the financial statements contained in Part I, Item 1 of this report for additional information.

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
Table of Contents


UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions)
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Operating revenue:       
Passenger revenue$681
 $10,486
 $7,746
 $19,211
Cargo402
 295
 666
 581
Other operating revenue392
 621
 1,042
 1,199
Total operating revenue1,475
 11,402
 9,454
 20,991
        
Operating expense:       
Salaries and related costs2,170
 3,057
 5,125
 5,930
Aircraft fuel240
 2,385
 1,966
 4,408
Regional capacity purchase388
 715
 1,125
 1,403
Landing fees and other rent429
 660
 1,052
 1,248
Depreciation and amortization618
 560
 1,233
 1,107
Aircraft maintenance materials and outside repairs110
 421
 544
 829
Distribution expenses31
 442
 326
 802
Aircraft rent47
 73
 97
 154
Special charges (credit)(1,449) 71
 (1,386) 89
Other operating expenses527
 1,546
 1,980
 3,053
Total operating expense3,111
 9,930
 12,062
 19,023
Operating income (loss)(1,636) 1,472
 (2,608) 1,968
        
Nonoperating income (expense):       
Interest expense(196) (191) (367) (379)
Interest capitalized17
 21
 38
 43
Interest income11
 38
 37
 67
Unrealized gains (losses) on investments, net9
 34
 (310) 51
Miscellaneous, net(208) (20) (906) (28)
Total nonoperating expense, net(367) (118) (1,508) (246)
Income (loss) before income taxes(2,003) 1,354
 (4,116) 1,722
Income tax expense (benefit)(377) 302
 (786) 377
Net income (loss)$(1,626) $1,052
 $(3,330) $1,345

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

8



UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions)
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Operating revenue: 
Passenger revenue$4,366 $681 $6,682 $7,746 
Cargo606 402 1,103 666 
Other operating revenue499 392 907 1,042 
Total operating revenue5,471 1,475 8,692 9,454 
Operating expense:
Salaries and related costs2,276 2,170 4,500 5,125 
Aircraft fuel1,232 240 2,083 1,966 
Depreciation and amortization620 618 1,243 1,233 
Landing fees and other rent564 429 1,083 1,052 
Regional capacity purchase547 388 1,026 1,125 
Aircraft maintenance materials and outside repairs302 110 571 544 
Distribution expenses139 31 224 326 
Aircraft rent52 47 107 97 
Special charges (credits)(948)(1,449)(2,325)(1,386)
Other operating expenses956 527 1,830 1,980 
Total operating expense5,740 3,111 10,342 12,062 
Operating loss(269)(1,636)(1,650)(2,608)
Nonoperating income (expense): 
Interest expense(426)(196)(779)(367)
Interest capitalized22 17 39 38 
Interest income12 11 19 37 
Unrealized losses on investments, net147 9 125 (310)
Miscellaneous, net(50)(208)(69)(906)
Total nonoperating expense, net(295)(367)(665)(1,508)
Loss before income tax benefit(564)(2,003)(2,315)(4,116)
Income tax benefit(130)(377)(524)(786)
Net loss$(434)$(1,626)$(1,791)$(3,330)
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.



9
UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In millions)

 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net loss$(434)$(1,626)$(1,791)$(3,330)
Other comprehensive income (loss), net of tax:
Employee benefit plans12 (501)26 (542)
Investments and other0 13 (1)1 
Total other comprehensive income (loss), net of tax12 (488)25 (541)
Total comprehensive loss, net$(422)$(2,114)$(1,766)$(3,871)
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Net income (loss)$(1,626) $1,052
 $(3,330) $1,345
        
Other comprehensive income (loss), net of tax:       
Employee benefit plans(501) (17) (542) (10)
Investments and other13
 3
 1
 6
Total other comprehensive income (loss), net of tax(488) (14) (541) (4)
        
Total comprehensive income (loss), net$(2,114) $1,038
 $(3,871) $1,341
10
UNITED AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
 June 30, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$20,838 $11,269 
Short-term investments230 414 
Restricted cash254 255 
Receivables, less allowance for credit losses (2021 — $71; 2020 — $78)1,793 1,295 
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2021 — $518; 2020 — $478)912 932 
Prepaid expenses and other646 635 
Total current assets24,673 14,800 
Operating property and equipment:
Flight equipment39,109 38,218 
Other property and equipment8,683 8,511 
Purchase deposits for flight equipment1,980 1,166 
Total operating property and equipment49,772 47,895 
Less — Accumulated depreciation and amortization(17,441)(16,429)
Total operating property and equipment, net32,331 31,466 
Operating lease right-of-use assets4,421 4,537 
Other assets:
Goodwill4,527 4,527 
Intangibles, less accumulated amortization (2021 — $1,519; 2020 — $1,495)2,827 2,838 
Restricted cash216 218 
Deferred income taxes619 103 
Investments in affiliates and other, less allowance for credit losses (2021 — $606; 2020 — $522)1,407 1,031 
Total other assets9,596 8,717 
Total assets$71,021 $59,520 

(continued on next page)

11
UNITED AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
 June 30, 2021December 31, 2020
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable$2,218 $1,595 
Accrued salaries and benefits2,228 1,960 
Advance ticket sales6,960 4,833 
Frequent flyer deferred revenue2,099 908 
Current maturities of long-term debt1,881 1,911 
Current maturities of operating leases583 612 
Current maturities of finance leases144 182 
Payroll Support Program deferred credit1,132 0 
Other823 728 
Total current liabilities18,068 12,729 
Long-term debt32,303 24,836 
Long-term obligations under operating leases4,920 4,986 
Long-term obligations under finance leases250 224 
Other liabilities and deferred credits:
Frequent flyer deferred revenue4,086 5,067 
Pension liability2,501 2,460 
Postretirement benefit liability988 994 
Other financial liabilities from sale-leasebacks1,683 1,140 
Other1,350 1,156 
Total other liabilities and deferred credits10,608 10,817 
Commitments and contingencies00
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, 2021 and December 31, 20200 0 
Additional capital invested185 85 
Retained earnings3,148 4,939 
Accumulated other comprehensive loss(1,114)(1,139)
Payable to parent2,653 2,043 
Total stockholder's equity4,872 5,928 
Total liabilities and stockholder's equity$71,021 $59,520 

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.





12

UNITED AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
 June 30, 2020 December 31, 2019
ASSETS   
Current assets:   
Cash and cash equivalents$6,505
 $2,756
Short-term investments958
 2,182
Receivables, less allowance for credit losses (2020 — $11; 2019 — $9)857
 1,364
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2020 — $464; 2019 — $425)955
 1,072
Prepaid expenses and other766
 814
Total current assets10,041
 8,188
Operating property and equipment:   
Flight equipment37,339
 35,421
Other property and equipment8,350
 7,926
Purchase deposits for flight equipment1,624
 1,360
Total operating property and equipment47,313
 44,707
Less — Accumulated depreciation and amortization(15,578) (14,537)
Total operating property and equipment, net31,735
 30,170
    
Operating lease right-of-use assets4,738
 4,758
    
Other assets:   
Goodwill4,523
 4,523
Intangibles, less accumulated amortization (2020 — $1,467; 2019 — $1,440)2,852
 3,009
Restricted cash73
 106
Notes receivable, less allowance for credit losses (2020 — $553)141
 671
Investments in affiliates and other, net798
 1,180
Total other assets8,387
 9,489
Total assets$54,901
 $52,605

(continued on next page)

Table of Contents

UNITED AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
 June 30, 2020 December 31, 2019
LIABILITIES AND STOCKHOLDER'S EQUITY   
Current liabilities:   
Advance ticket sales$4,950
 $4,819
Accounts payable1,725
 2,703
Frequent flyer deferred revenue840
 2,440
Accrued salaries and benefits1,669
 2,271
Current maturities of long-term debt4,454
 1,407
Current maturities of finance leases93
 46
Current maturities of operating leases598
 686
Payroll Support Program deferred credit1,508
 —
Other562
 571
Total current liabilities16,399
 14,943
    
Long-term debt14,318
 13,145
Long-term obligations under finance leases316
 220
Long-term obligations under operating leases5,113
 4,946
    
Other liabilities and deferred credits:   
Frequent flyer deferred revenue4,830
 2,836
Postretirement benefit liability957
 789
Pension liability2,221
 1,446
Deferred income taxes832
 1,763
Other1,430
 1,025
Total other liabilities and deferred credits10,270
 7,859
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, 2020 and December 31, 2019—
 —
Additional capital invested30
 —
Retained earnings8,676
 12,353
Accumulated other comprehensive loss(1,259) (718)
Receivable from related parties1,038
 (143)
Total stockholder's equity8,485
 11,492
Total liabilities and stockholder's equity$54,901
 $52,605


The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.





Table of Contents

UNITED AIRLINES, INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In millions)
 Six Months Ended June 30,
 20212020
Cash Flows from Operating Activities:
Net cash provided by (used in) operating activities$3,101 $(78)
Cash Flows from Investing Activities:
Capital expenditures, net of flight equipment purchase deposit returns(1,305)(1,998)
Purchases of short-term investments0 (550)
Proceeds from sale of short-term investments184 1,774 
Other, net11 14 
Net cash used in investing activities(1,110)(760)
Cash Flows from Financing Activities:
Proceeds from issuance of debt, net of discounts and fees11,116 4,371 
Proceeds from issuance of parent company stock532 1,135 
Payments of long-term debt, finance leases and other financing liabilities(4,072)(564)
Dividend to UAL0 (353)
Other, net(1)(1)
Net cash provided by financing activities7,575 4,588 
Net increase in cash, cash equivalents and restricted cash9,566 3,750 
Cash, cash equivalents and restricted cash at beginning of the period11,742 2,862 
Cash, cash equivalents and restricted cash at end of the period (a)$21,308 $6,612 
Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through the issuance of debt, finance leases and other$761 $626 
Lease modifications and lease conversions59 470 
Right-of-use assets acquired through operating leases214 48 
Notes receivable and warrants received for entering into agreements139 0 
 Six Months Ended June 30,
 2020 2019
    
Cash Flows from Operating Activities:   
Net cash provided (used) by operating activities$(78) $4,596
    
Cash Flows from Investing Activities:   
Capital expenditures, net of returns of purchase deposits on flight equipment(1,998) (2,467)
Purchases of short-term investments and other investments(550) (1,443)
Proceeds from sale of short-term and other investments1,774
 1,484
Other, net14
 (10)
Net cash used in investing activities(760) (2,436)
    
Cash Flows from Financing Activities:   
Proceeds from issuance of short-term debt2,750
 —
Proceeds from issuance of long-term debt1,669
 996
Proceeds from issuance of parent's stock1,135
 —
Payments of long-term debt(523) (473)
Dividend to UAL(353) (1,062)
Principal payments under finance leases(41) (63)
Capitalized financing costs(48) (30)
Other, net(1) (1)
Net cash provided (used) in financing activities4,588
 (633)
Net increase in cash, cash equivalents and restricted cash3,750
 1,527
Cash, cash equivalents and restricted cash at beginning of the period2,862
 1,793
Cash, cash equivalents and restricted cash at end of the period (a)$6,612
 $3,320
    
Investing and Financing Activities Not Affecting Cash:   
Property and equipment acquired through the issuance of debt$327
 $220
Property and equipment acquired through other financial liabilities280
 —
Lease modifications and lease conversions470
 36
Right-of-use assets acquired through operating leases48
 99
Property and equipment acquired through finance leases19
 8


(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:
Current assets:
Cash and cash equivalents$20,838 $6,505 
Restricted cash — Current254 34 
Restricted cash — Non-Current216 73 
Total cash, cash equivalents and restricted cash$21,308 $6,612 
Cash and cash equivalents$6,505
 $3,215
Restricted cash (included in Prepaid expenses and other)34
 —
Restricted cash73
 105
Total cash, cash equivalents and restricted cash$6,612
 $3,320


The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
13

UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDER'S EQUITY (UNAUDITED)
(In millions)
 Additional
Capital Invested		Retained EarningsAccumulated
Other Comprehensive Income (Loss)		(Receivable from) Payable to Related Parties, NetTotal
Balance at March 31, 2021$117 $3,582 $(1,126)$2,602 $5,175 
Net loss— (434)— — (434)
Other comprehensive income— — 12 — 12 
Stock-settled share-based compensation68 — — — 68 
Other— — — 51 51 
Balance at June 30, 2021$185 $3,148 $(1,114)$2,653 $4,872 
Balance at December 31, 2020$85 $4,939 $(1,139)$2,043 $5,928 
Net loss— (1,791)— — (1,791)
Other comprehensive income— — 25 — 25 
Stock settled share-based compensation100 — — — 100 
Impact of UAL common stock issuance— — — 532 532 
Other— — — 78 78 
Balance at June 30, 2021$185 $3,148 $(1,114)$2,653 $4,872 
Balance at March 31, 2020$10 $10,302 $(771)$(161)$9,380 
Net loss— (1,626)— — (1,626)
Other comprehensive loss— — (488)— (488)
Stock-settled share-based compensation20 — — — 20 
Impact of UAL common stock issuance— — — 1,135 1,135 
Other— — — 64 64 
Balance at June 30, 2020$30 $8,676 $(1,259)$1,038 $8,485 
Balance at December 31, 2019$0 $12,353 $(718)$(143)$11,492 
Net loss— (3,330)— — (3,330)
Other comprehensive loss— — (541)— (541)
Dividend to UAL(12)(330)— — (342)
Stock settled share-based compensation42 — — — 42 
Impact of UAL common stock issuance— — — 1,135 1,135 
Other— — — 46 46 
Adoption of new accounting standard (a)— (17)— — (17)
Balance at June 30, 2020$30 $8,676 $(1,259)$1,038 $8,485 
  
Additional
Capital Invested
 Retained Earnings 
Accumulated
Other Comprehensive Loss
 Receivable from Related Parties, Net Total
 
 Balance at March 31, 2020$10
 $10,302
 $(771) $(161) $9,380
 Net loss—
 (1,626) —
 —
 (1,626)
 Other comprehensive loss—
 —
 (488) —
 (488)
 Stock settled share-based compensation20
 —
 —
 —
 20
 Other—
 —
 —
 1,199
 1,199
 Balance at June 30, 2020$30
 $8,676
 $(1,259) $1,038
 $8,485
           
 Balance at December 31, 2019$—
 $12,353
 $(718) $(143) $11,492
 Net loss—
 (3,330) —
 —
 (3,330)
 Other comprehensive loss—
 —
 (541) —
 (541)
 Dividend to UAL(12) (330) —
 —
 (342)
 Stock settled share-based compensation42
 —
 —
 —
 42
 Other—
 —
 —
 1,181
 1,181
 Adoption of new accounting standard (a)—
 (17) —
 —
 (17)
 Balance at June 30, 2020$30
 $8,676
 $(1,259) $1,038
 $8,485
           
 Balance at March 31, 2019$84
 $10,612
 $(793) $(140) $9,763
 Net income—
 1,052
 —
 —
 1,052
 Other comprehensive income—
 —
 (14) —
 (14)
 Dividend to UAL(102) (434) —
 —
 (536)
 Stock settled share-based compensation17
 —
 —
 —
 17
 Other1
 —
 —
 (1) —
 Balance at June 30, 2019$—
 $11,230
 $(807) $(141) $10,282
           
 Balance at December 31, 2018$598
 $10,319
 $(803) $(110) $10,004
 Net income (a)—
 1,345
 —
 —
 1,345
 Other comprehensive income—
 —
 (4) —
 (4)
 Dividend to UAL(629) (434) —
 —
 (1,063)
 Stock settled share-based compensation31
 —
 —
 —
 31
 Other—
 —
 —
 (31) (31)
 Balance at June 30, 2019$—
 $11,230
 $(807) $(141) $10,282

(a) Transition adjustment due to the adoption of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses. See Note 1 to the financial statements contained in Part I, Item 1 of this report for additional information.


The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
14

UNITED AIRLINES HOLDINGS, INC. AND UNITED AIRLINES, INC.
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
United Airlines Holdings, Inc. (together with its consolidated subsidiaries, "UAL" or the "Company") is a holding company, and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, "United"). This Quarterly Report on Form 10-Q is a combined report of UAL and United, including their respective consolidated financial statements. As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United's operating revenues and operating expenses comprise nearly 100% of UAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL's assets, liabilities and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words "we," "our," "us," and the "Company" in this report for disclosures that relate to all of UAL and United.
The UAL and United unaudited condensed consolidated financial statements shown here have been prepared as required by the U.S. Securities and Exchange Commission (the "SEC"). Some information and footnote disclosures normally included in financial statements that comply with accounting principles generally accepted in the United States ("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's financial position and results of operations. The UAL and United financial statements should be read together with the information included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 (the "2019"2020 Form 10-K"). The Company's quarterly financial data is subject to seasonal fluctuations. Historically its second and third quarter financial results have reflected higher travel demand, and were better than its first and fourth quarter financial results; however, see Part I, Item 2 of this report for additional discussion regarding trends associated with the matters discussed in the "Recent Developments"Impact of the COVID-19 Pandemic" section below.
Recent Developments
In December 2019, a novel strain of coronavirus ("COVID-19") was reported in Wuhan, China, and the World Health Organization subsequently declared COVID-19 a "pandemic." As a result of COVID-19, the U.S. government declared a national emergency, the U.S. Department of State issued numerous travel advisories, including a global Level 4 "do not travel" advisory advising U.S. citizens to avoid all international travel, and the U.S. government has implemented a number of travel-related protocols, including enhanced screenings and mandatory 14-day quarantines. Many foreign and U.S. state and local governments have instituted similar measures and declared states of emergency.
In the United States and other locations around the world, throughout the first half of 2020, people were instructed to stay home or "shelter in place" and public events, such as conferences, sporting events and concerts, have been canceled, attractions, including theme parks and museums, have been closed, cruise lines have suspended operations and schools and businesses are operating with remote attendance, among other actions. In addition, governments, non-governmental organizations and entities in the private sector have issued non-binding advisories or recommendations regarding air travel or other social distancing measures, including limitations on the number of persons that should be present at public gatherings. While "shelter in place" restrictions and similar advisories and recommendations have been reduced or otherwise eased in certain circumstances, this varies by jurisdiction and organization. In addition, numerous jurisdictions have imposed or reinstated more severe restrictions as a resultImpact of the continued spread of COVID-19 or resurgences in the severity of COVID-19 in certain locations, including travel restrictions, mandatory self-quarantine requirements and other enhanced COVID-19-related screening measures that may apply to our personnel and/or the traveling public.Pandemic
The Company began experiencing a significant declinenovel coronavirus (COVID-19) pandemic, together with the measures implemented or recommended by governmental authorities and private organizations in internationalresponse to the pandemic, has had an adverse impact that has been material to the Company's business, operating results, financial condition and domestic demand related to COVID-19 during the first quarter of 2020.liquidity. The decline in demand caused a material deterioration in our revenues in the first half of 2020, resulting in a net loss of $3.3 billion for that period. Although during the second quarter of 2020 the Company experienced modest, but steady improvement in demand, the Company has since experienced reduced demand and increased cancellations to destinations experiencing increases in COVID-19 cases and/or new quarantine requirements imposed in certain jurisdictions or other restrictions on travel. As a result, the full extent of the ongoing impact of COVID-19 on the Company's longer-term operational and financial performance will depend on future developments, many of which areincluding those outside of our control related to the efficacy and allspeed of which are highly uncertainvaccination programs in curbing the spread of the virus in different markets, the introduction and cannotspread of new variants of the virus that may be predicted; however,resistant to currently approved vaccines and the continuation of existing or implementation of new government travel restrictions.
Capacity.The Company began experiencing a significant decline in international and domestic travel demand related to COVID-19 during the first quarter of 2020, and this reduction in demand has continued through the date of this report. However, since March 2021, the Company currently expects our results of operationshas seen increasing demand for full-year 2020 to be materially impactedtravel both domestically and that we will incur a net loss for the full-year 2020.
In response to decreased demand, thein countries where entry is permitted. The Company cut, relative to second quarter 2019 capacity, approximately 88%46% of its scheduled capacity for the second quarter of 2020. The Company2021 and expects its third quarter scheduled capacity to be down approximately 65% year-over-year in26% versus the third quarter of 2020.2019. The Company also expectswill continue to monitor booking trends for future travel and adjust its scheduled capacity as needed.
Cost Reductions. The Company has identified various permanent structural cost reductions including improvements in labor efficiencies. During the fourthfirst quarter of 20202021, the Company offered voluntary leaves of absences to be generally consistentcertain U.S.-based front-line employees. This program included (based on employee group, age and completed years of service) a partially-paid leave of absence with active health care coverage and travel privileges. Employees who separate from the Company after the end of such program receive certain separation benefits, such as post-employment health benefits and travel privileges. Approximately 4,500 employees elected to participate in this program, and it is expected that the majority of them will separate from employment at the end of their leave of absence. See Note 5 and Note 9 of this report for additional information on charges related to these programs.
Liquidity. The Company entered into a number of transactions to improve its liquidity and manage its capital. In the first half of 2021, the Company:
•issued, through a private offering to eligible purchasers, $4.0 billion in aggregate principal amount of two series of notes, consisting of $2.0 billion in aggregate principal amount of 4.375% senior secured notes due 2026 (the "2026 Notes") and $2.0 billion in aggregate principal amount of 4.625% senior secured notes due 2029 (the "2029 Notes" and, together with the third quarter2026 Notes, the "Notes," and each a "series" of 2020. The Company plansNotes);
•entered into a new Term Loan Credit and Guaranty Agreement (the "New Term Loan Facility") initially providing term loans (the "New Term Loans") up to continue to proactively evaluatean aggregate amount of $5.0 billion and cancel flights on a rolling 60-daynew Revolving Credit and
15

basis until it sees signsGuaranty Agreement (the "New Revolving Credit Facility" and, together with the New Term Loan Facility, the "New Loan Facilities") initially providing revolving loan commitments of a recovery in demand. The Company expects demandup to remain suppressed until a widely accepted treatment and/or vaccine for COVID-19 is available. In addition, the Company does not currently expect the recovery from COVID-19 to follow a linear path.$1.75 billion;
The Company has taken a number•repaid in full the $1.4 billion aggregate principal amount outstanding under the term loan facility (the "2017 Term Loan Facility") included in the Amended and Restated Credit and Guaranty Agreement, dated as of actionsMarch 29, 2017 (the "Existing Credit Agreement");
•repaid in responsefull the $1.0 billion aggregate principal amount outstanding under the revolving credit facility (the "2017 Revolving Credit Facility") included in the Existing Credit Agreement;
•repaid in full the $520 million aggregate principal amount outstanding under the Loan and Guarantee Agreement, dated as of September 28, 2020, among United, UAL, the U.S. Treasury Department ("Treasury") and the Bank of New York Mellon, as administrative agent, as amended (the "CARES Act Loan" and, together with the 2017 Term Loan Facility and the 2017 Revolving Credit Facility, the "Existing Loan Facilities"), which was entered into pursuant to the decreased demand for air travel. loan program established pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act");
•entered into approximately $0.6 billion in new enhanced equipment trust certificates ("EETC"); and
•raised approximately $0.5 billion in net cash proceeds from the issuance and sale of UAL common stock.
In addition to the schedule reductions discussed above, the Company has:
•
reduced its planned capital expenditures and reduced operating expenditures for the remainder of 2020 and 2021 (including by postponing projects deemed non-critical to the Company's operations);
•
terminated its share repurchase program;
as of July 2, 2020, issued orforegoing transactions, United entered into approximately $10.0 billion ($3.0 billion through June 30, 2020) in secured notes, secured term loan facilities and new aircraft financings, including $6.8 billion of senior secured notes and a secured term loan facility (the "MileagePlus Financing") secured by substantially all of the assets of Mileage Plus Holdings, LLC, a direct wholly-owned subsidiary of United ("MPH"), and Mileage Plus Intellectual Property Assets, Ltd., an indirect wholly-owned subsidiary of MPH ("MIPA");following agreements with Treasury:
raised approximately $1.1 billion in cash proceeds in an underwritten public offering of UAL common stock;
•
entered into an equity distribution agreement relating to the issuance and sale, from time to time, of up to 28 million shares of UAL common stock;PSP2.
•
borrowed, on July 2, 2020, $1.0 billion under the $2.0 billion revolving credit facility of the Amended and Restated Credit and Guaranty Agreement (the "Revolving Credit Agreement");
entered into an agreement to finance certain aircraft currently subject to purchase agreements through a sale and leaseback transaction;
•
elected to defer the payment of $78 million in payroll taxes incurred through June 30, 2020, as provided by the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), until 2021 and 2022;
•
temporarily grounded certain of its mainline fleet; and
•
taken a number of actions to reduce employee-related costs, including, among other items, the Company's Chief Executive Officer and President waived 100% of their respective base salaries through 2020, other officers temporarily waived a portion of their base salaries, the Company's non-employee directors waived 100% of their cash compensation for the second and third quarters of 2020, the Company suspended merit salary increases and implemented a temporary four-day work week for management and administrative employees and the Company offered voluntary unpaid leaves of absence.
On July 8, 2020, in order to comply with various labor regulations in certain jurisdictions, including pursuant to the Worker Adjustment and Retraining Notification Act, United informed approximately 36,000 U.S.-based employees, either directly or through a union representative, of plans to implement a workforce reduction at their work locations. These notices are part of the Company's strategic realignment of its business and new organizational structure as a result of the impacts of the COVID-19 pandemic on the Company's operations and cost structure. The Company expects that these actions will take effect on or after October 1, 2020 and may continue through the end of 2020.
The Company continues to focus on reducing expenses and managing its liquidity. We expect to continue to modify our cost management structure, liquidity-raising efforts and capacity as the timing of demand recovery becomes more certain.
On March 27, 2020, the President of the United States signed the CARES Act into law. The CARES Act is intended to respond to the COVID-19 pandemic and its impact on the economy, public health, state and local governments, individuals, and businesses. The CARES Act also provides supplemental appropriations for federal agencies to respond to the COVID-19 pandemic.
On April 20, 2020,January 15, 2021, United entered into a Payroll Support Program Extension Agreement (the "PSP"PSP2 Agreement") with the U.S. Treasury Department providing the Company with total funding of approximately $5.0$3.0 billion, pursuant to the Payroll Support Program established under Subtitle A of Title IV of Division N of the CARES Act.Consolidated Appropriations Act, 2021. These funds will bewere used to pay for the wages, salaries and benefits of United employees, including the payment of lost wages, salaries and benefits to returning employees. Approximately $3.5$2.1 billion of the $5.0 billion will bewas provided as a direct grant and approximately $1.5 billion will be in the form of$870 million as indebtedness evidenced by a 10-year senior unsecured promissory note (the "PSP"PSP2 Note"). See Note 2 of this report for additional information on the warrants issued in connection with the PSP2 Note and Note 8 of this report for a discussion of the PSP2 Note. As a result of June 30, 2020,the PSP2 Agreement, the Company has received approximately $4.5 billion of the expected $5.0 billion throughoffered an opportunity to return to active employment to U.S. employees who were impacted by involuntary furloughs.
PSP3. On April 29, 2021, in connection with the Payroll Support Program established under Section 7301 of the CARES Act. The approximately $500 million remaining balance is expected to be received by the endAmerican Rescue Plan Act of July 2020. As of June 30, 2020, the Company recorded $1.6 billion in grant income as Special charges (credit) and recorded $1.5 billion as2021, United entered into a Payroll Support Program deferred credit. The3 Agreement (the "PSP3 Agreement") with Treasury providing the Company also recorded $57with total funding of approximately $2.8 billion. Approximately $2.0 billion was provided as a direct grant and $810 million inas indebtedness evidenced by a 10-year senior unsecured promissory note (the "PSP3 Note"). These funds will be used by United exclusively for the continuation of payment of its employee wages, salaries and benefits. See Note 2 of this report for additional information on the warrants issued to the U.S. Treasury Department, within stockholder's equity, in connection with the PSPPSP3 Note and Note 8 of this report for a discussion of the PSP3 Note. See Note
United Next. On June 27, 2021, United entered into a supplemental agreement to that certain Purchase Agreement, dated May 15, 2018 with The Boeing Company ("Boeing") for a firm narrowbody aircraft order of 200 Boeing 737 MAX aircraft. The order consists of 150 Boeing 737 MAX 10s and 50 Boeing 737 MAX 8s. Also on June 27, 2021, United entered into an amendment to that certain Purchase Agreement, dated December 3, 2019 with Airbus S.A.S ("Airbus") for a firm narrowbody aircraft order of 70 Airbus A321neo aircraft. The firm orders of 200 Boeing 737 MAX aircraft and 70 Airbus A321neo aircraft are expected to the financial statements includedbe delivered starting in Part I, Item 1 for additional information related to these warrants.2023 through 2028 and 2026, respectively.
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In connection with entering into the PSP Agreement, during the second quarter, UAL issued the PSP Note to the U.S. Treasury Department evidencing senior unsecured indebtedness of UAL of approximately $1.3 billion. The principal amount of the PSP Note will increase in an amount equal to 30% of any disbursement made by the U.S. Treasury Department to United under the PSP Agreement after June 30, 2020. The PSP Note is guaranteed by United and will mature ten years after the initial issuance on April 20, 2030. If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness of UAL with a principal balance in excess of a specified amount, or if certain subsidiaries are formed or acquired, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP Note. UAL may, at its option, prepay the PSP Note, at any time, and from time to time, at par. UAL is required to prepay the PSP Note upon the occurrence of certain change of control triggering events. The PSP Note does not require any amortization and is to be repaid in full on the maturity date.
Under the PSP Agreement, the Company and its business are subject to certain restrictions, including, but not limited to, restrictions on the payment of dividends and the ability to repurchase UAL's equity securities, requirements to maintain certain levels of scheduled service, requirements to maintain U.S. employment levels through September 30, 2020 and certain limitations on executive compensation.
On April 17, 2020, the Company submitted an application to the Loan Program under the CARES Act. Under the Loan Program, the Company expects to have the ability, through March 26, 2021, to borrow up to approximately $4.5 billion from the U.S. Treasury Department for a term of up to five years. The Company continues to work with the U.S. Treasury Department on the CARES Act Loan Program loan, and it is the Company's expectation that, if the Company takes the loan, it will use available slots, gates and routes collateral. The Company believes it has sufficient slots, gates and routes collateral available to meet the collateral coverage that may be required for the full $4.5 billion available to the Company under the Loan Program.
In connection with any borrowings under the Loan Program, the Company and its business will be subject to certain restrictions, including, but not limited to, certain of the restrictions described above with respect to the PSP Agreement.
NOTE 1 - RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses ("ASU 2016-13") effective January 1, 2020. ASU 2016-13 replaces the incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans and held-to-maturity debt securities, entities are required to estimate lifetime expected credit losses. For available-for-sale debt securities, entities are required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. The Company recorded a $17 million cumulative-effect adjustment, net of related income taxes, to its retained earnings balance on January 1, 2020 as a result of this adoption. See Notes 7, 8, 9 and 11 to the financial statements included in Part I, Item 1 for additional disclosures about the impact of ASU 2016-13 on the six months ended June 30, 2020 results.
NOTE 2 - REVENUE
Revenue by Geography. The table below presents the Company's operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) (in millions):
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Domestic (U.S. and Canada)$925
 $7,087
 $6,003
 $12,962
Atlantic219
 2,066
 1,434
 3,524
Pacific258
 1,306
 1,064
 2,587
Latin America73
 943
 953
 1,918
Total$1,475
 $11,402
 $9,454
 $20,991

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Domestic (U.S. and Canada)$3,767 $925 $5,878 $6,003 
Atlantic585 219 995 1,434 
Pacific392 258 700 1,064 
Latin America727 73 1,119 953 
Total$5,471 $1,475 $8,692 $9,454 
Advance Ticket Sales. All tickets sold at any given point ofin time have travel dates extending up tothrough 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 on electronic travel certificates ("ETCs") and future flight credits ("FFCs"), primarily for ticket cancellations, which can be applied towards a purchase of a new ticket. In April 2020, due to the COVID-19 pandemic,February 2021, the Company extended the expiration dates of ETCs from 12 months from the date of issuance to 24 months from the date of issuance and extended the expiration of FFCs, for all tickets issued between May 1, 2019 and March 31, 2020,2021 to 24 months from the original issue date.March 31, 2022. As of June 30, 2020,2021, the Company's Advance ticket sales liability included $3.0$2.6 billion related to these creditsETCs and approximately 93% of these credits have expiration dates extending beyond 12 months. However,
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given the uncertainty of travel demand caused by COVID-19, theFFCs. The Company is unable to estimate the amount of the ETCs and FFCs that will be used within the next 12 months and has classified the entire amount of the AdvancedAdvance ticket sales liability in current liabilities even though some of the ETCs and FFCs could be used after the next 12 months. Also, the Company is unable to estimate the December 31, 2019amount of the June 30, 2021 Advance ticket sales that will be recognized in revenue in 2020 due2021 compared to the higher than historical refunds and exchangesamounts refunded to customers or exchanged into ETCs or FFCs. ETCs.
The Company continues to userecords breakage revenue on the travel date for its estimate of tickets that will expire unused. To determine breakage, the Company uses its historical experience with refundable and mostnonrefundable expired tickets and other facts, such as recent aging trends, and program changes to estimate itsand modifications that could affect the ultimate expiration patterns of tickets. Given the uncertainty of travel demand caused by COVID-19, a significant portion of the ETCs and FFCs may expire unused in future periods and get recognized as breakage. The Company will continue to update its breakage estimates as future information is received.
In the three and six months ended June 30, 2021, the Company recognized approximately $1.5 billion and $1.4 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods. In the three and six months ended June 30, 2020, the Company recognized approximately $0.5 billion and $2.8 billion, respectively, and in the three and six months ended June 30, 2019, the Company recognized approximately $3.9 billion and $3.2 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods.
Ancillary Fees. The Company charges fees, separately from ticket sales, for certain ancillary services that are directly related to passengers' travel, such as ticket change fees, baggage fees, premium seats, 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 $66$499 million and $542$807 million of ancillary fees within passenger revenue in the three and six months ended June 30, 2020,2021, respectively. The Company recorded $636$71 million and $1.2 billion$776 million of ancillary fees within passenger revenue in the three and six months ended June 30, 2019,2020, respectively.
Frequent Flyer Accounting. The table below presents a roll forward of Frequent flyer deferred revenue (in millions):
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Total Frequent flyer deferred revenue - beginning balance$5,488
 $5,138
 $5,276
 $5,005
Total miles awarded228
 682
 787
 1,289
Travel miles redeemed (Passenger revenue)(34) (589) (356) (1,027)
Non-travel miles redeemed (Other operating revenue)(12) (33) (37) (69)
Total Frequent flyer deferred revenue - ending balance$5,670
 $5,198
 $5,670
 $5,198

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Total Frequent flyer deferred revenue - beginning balance$6,109 $5,488 $5,975 $5,276 
Total miles awarded360 228 632 787 
Travel miles redeemed (Passenger revenue)(267)(34)(390)(356)
Non-travel miles redeemed (Other operating revenue)(17)(12)(32)(37)
Total Frequent flyer deferred revenue - ending balance$6,185 $5,670 $6,185 $5,670 
In the three and six months ended June 30, 2020,2021, the Company recognized, in Other operating revenue, $339$449 million and $869$811 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 JPMorgan Chase Bank, N.A. ("Chase") co-brand agreement. The Company recognized $499$339 million and $972$869 million, respectively, in the three and six months ended June 30, 2019,2020, related to those revenues. 
In the first quarter of 2020, the Company entered into a Third Amended and Restated Co-Branded Card Marketing Services Agreement (as amended from time to time, the "Co-Brand Agreement") with Chase. The Co-Brand Agreement extended the term of the agreement into 2029 and modified certain other terms, resulting in a different allocation among the separately identifiable performance obligations.agreements. The portion related to the MileagePlus miles awarded of the total amounts received from our various partner agreements is deferred and presented in the table above as an increase to the frequent flyer liability. We determine the current portion of our frequent flyer liability based on expected redemptions in the
17
next 12 months. Given the uncertainty in travel demand caused by COVID-19, we currently estimate a greaterlarge percentage of award redemptions will occur beyond 12 months,months; however, this estimate may change as travel demand and award redemptions become clearer in future periods.
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NOTE 32 - EARNINGS (LOSS)LOSS PER SHARE
The computations of UAL's basic and diluted earnings (loss)loss per share are set forth below (in millions, except per share amounts):
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Earnings (loss) available to common stockholders$(1,627) $1,052
 $(3,331) $1,344
        
Basic weighted-average shares outstanding280.7
 260.8
 264.6
 263.9
Effect of employee stock awards and warrants (a)—
 0.8
 —
 1.0
Diluted weighted-average shares outstanding280.7
 261.6
 264.6
 264.9
        
Earnings (loss) per share, basic$(5.79) $4.03
 $(12.59) $5.09
Earnings (loss) per share, diluted$(5.79) $4.02
 $(12.59) $5.07

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Loss available to common stockholders$(434)$(1,627)$(1,791)$(3,331)
Weighted-average shares outstanding, basic and diluted323.6 280.7 320.1 264.6 
Loss per share, basic and diluted$(1.34)$(5.79)$(5.60)$(12.59)
(a) Antidilutive common stock equivalents excluded fromDuring the diluted per share calculation are not material.
On April 20, 2020,first quarter of 2021, UAL entered into a warrant agreement with the U.S. Treasury Department, pursuant to which UAL agreedissued to issue to the U.S. Treasury Department warrants to purchase up to approximately 4.62.0 million shares of UAL common stock pro rata in conjunction with the initial issuance of, and increases to, the principal amount outstanding under the PSP Note (the "PSP"PSP2 Warrants"). Through June 30, 2020, UAL issued PSP Warrants to purchase up to approximately 4.2 million shares of common stock, with such warrants accounted for as equity instruments. The PSPPSP2 Warrants have a strike price of $31.50$43.26 per share (which was the closing price of UAL's common stock onshare. The Nasdaq Stock Market on April 9, 2020). The PSPPSP2 Warrants will expire five years after issuance and are exercisable either through net share settlement in cash or in shares of UAL common stock, at UAL's option. The PSPrelative fair value of the PSP2 Warrants was calculated using a Black-Scholes options pricing model, and approximately $56 million was recorded within stockholders' equity with an offset to the CARES Act grant credit. During the second quarter of 2021, UAL also entered into a warrant agreement with Treasury, pursuant to which UAL issued to Treasury warrants to purchase up to approximately 1.5 million shares of UAL common stock (the "PSP3 Warrants"). The PSP3 Warrants have a strike price of $53.92 per share. The PSP3 Warrants will expire five years after issuance and are exercisable either through net share settlement in cash or in shares of UAL common stock, at UAL's option. The relative fair value of the PSP3 Warrants was calculated using a Black-Scholes options pricing model, and approximately $43 million was recorded within stockholders' equity with an offset to the CARES Act grant credit.
The PSP2 Warrants and PSP3 Warrants contain customary anti-dilution provisions and registration rights and are freely transferable. Pursuant to the terms of the PSPPSP2 Warrants PSP Warrantand PSP3 Warrants, warrant holders do not have any voting rights. The relative fair valueAs of the PSP Warrants is recorded within stockholder's equity and as a discount reducing the CARES Act grant credit.
IfJune 30, 2021, the Company borrows any amounts underhad the CARES Act Loan Program, UAL expects to issue to the U.S. Treasury Department additionalfollowing warrants to purchase shares of UAL common stock. For example, if the Company borrows the full amount currently available of $4.5 billion, the Company would issue warrants to purchase approximately 14.2 million shares of UAL common stock at a strike price of $31.50 per share (which was the closing price of UAL's common stock on The Nasdaq Stock Market on April 9, 2020), on the same terms as the PSP Warrants. If the Company borrows less than the full amount, the amount of warrants issued is expected to be reduced by a proportional amount.outstanding:
On April 21, 2020, UAL entered into an underwriting agreement (the "Underwriting Agreement") with Morgan Stanley & Co. LLC and Barclays Capital Inc. (collectively, the "Underwriters"), relating to the issuance and sale by UAL of 39,250,000 shares of its common stock, par value $0.01 per share, at a price to the public of $26.50 per share. Pursuant to the Underwriting Agreement, UAL granted the Underwriters a 30-day option to purchase up to an additional 3,925,000 shares of UAL common stock on the same terms, and such option was exercised in full, resulting in total proceeds of approximately $1.1 billion.
Warrant DescriptionNumber of Shares of UAL Common Stock (in millions)Exercise PriceExpiration Dates
PSP1 Warrants (a)4.8 $31.50 4/20/2025—9/30/2025
CARES Act Loan Warrants1.7 31.50 9/28/2025
PSP2 Warrants2.0 43.26 1/15/2026—4/29/2026
PSP3 Warrants1.5 53.92 4/29/2026—6/10/2026
Total10.0 
(a)Warrants issued in connection with the $1.5 billion 10-year senior unsecured promissory note with Treasury provided under the Payroll Support Program of the CARES Act ("PSP1").
On June 15, 2020, UAL entered into an equity distribution agreement (the "Distribution Agreement") with Citigroup Global Markets Inc., BofA Securities, Inc. and J.P. Morgan Securities LLC, relating to the issuance and sale from time to time by UAL (the "2020 ATM Offering"), of up to 28 million shares of UAL common stock. In the first quarter of 2021, the Company sold approximately 7 million shares at an average price of $42.98 per share, with net proceeds to the Company of approximately $282 million. With these sales, the Company sold all of the shares authorized under the 2020 ATM Offering.
On March 3, 2021, the Company entered into an equity distribution agreement (the "Distribution Agreement") with Morgan Stanley & Co. LLC, AmeriVet Securities, Inc., Barclays Capital Inc., BofA Securities, Inc., BBVA Securities Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Loop Capital Markets LLC and Wells Fargo Securities, LLC (collectively, the "Managers"), relating to the issuance and sale from time to time by UAL (the "ATM"2021 ATM Offering"), through the Managers, of up to 28,000,00037 million shares of UAL'sUAL common stock par value $0.01 per share (the "Shares""2021 ATM Shares"). Sales of the 2021 ATM Shares if any, under the Distribution Agreement may be made in any transactions that are deemed to be "at the market
18
offerings" as defined in Rule 415 under the Securities Act of 1933, as amended. Under the terms of the Distribution Agreement, UAL may also sell the 2021 ATM Shares to any Manager, as principal for its own account, at a price agreed upon at the time of sale. If UAL sells the 2021 ATM Shares to a Manager as principal, UAL will enter into a separate terms agreement with such Manager. As ofDuring the six months ended June 30, 2020, 0.52021, approximately 4 million shares were sold in the 2021 ATM Offering at an average price of $41.05$57.50 per share, with net proceeds to the Company totaling approximately $22$250 million.
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NOTE 43 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The tables below present the components of the Company's accumulated other comprehensive income (loss), net of tax ("AOCI") (in millions):
 
 Pension and Other Postretirement Liabilities
Investments and Other
Deferred Taxes
Total
 
 Balance at March 31, 2020 $(613) $(14) $(144) $(771)
 Changes in value (721) 17
 156
 (548)
 Amounts reclassified to earnings 77
(a)—
 (17) 60
 Balance at June 30, 2020 $(1,257)
$3

$(5)
$(1,259)
 Balance at December 31, 2019 $(560)
$2

$(160)
$(718)
 Changes in value (770) 1
 171
 (598)
 Amounts reclassified to earnings 73
(a)—
 (16) 57
 Balance at June 30, 2020 $(1,257)
$3

$(5)
$(1,259)
          
 Balance at March 31, 2019 $(654) $1
 $(140) $(793)
 Changes in value (29) 2
 7
 (20)
 Amounts reclassified to earnings 8
(a)—
 (2) 6
 Balance at June 30, 2019 $(675) $3
 $(135) $(807)
 Balance at December 31, 2018 $(663) $(4) $(136) $(803)
 Changes in value (24) 7
 4
 (13)
 Amounts reclassified to earnings 12
(a)—
 (3) 9
 Balance at June 30, 2019 $(675) $3
 $(135) $(807)

Pension and Other Postretirement LiabilitiesInvestments and OtherDeferred TaxesTotal
Balance at March 31, 2021$(1,084)$1 $(43)$(1,126)
Changes in value11 0 (2)9 
Amounts reclassified to earnings5 (a)0 (2)3 
Balance at June 30, 2021$(1,068)$1 $(47)$(1,114)
Balance at December 31, 2020$(1,102)$2 $(39)$(1,139)
Changes in value24 (1)(5)18 
Amounts reclassified to earnings10 (a)0 (3)7 
Balance at June 30, 2021$(1,068)$1 $(47)$(1,114)
Balance at March 31, 2020$(613)$(14)$(144)$(771)
Changes in value(721)17 156 (548)
Amounts reclassified to earnings77 (a)0 (17)60 
Amounts reclassified to retained earnings— — — — 
Balance at June 30, 2020$(1,257)$3 $(5)$(1,259)
Balance at December 31, 2019$(560)$2 $(160)$(718)
Changes in value(770)1 171 (598)
Amounts reclassified to earnings73 (a)0 (16)57 
Balance at June 30, 2020$(1,257)$3 $(5)$(1,259)
(a) This AOCI component is included in the computation of net periodic pension and other postretirement costs (See(see Note 6 to the financial statements included in Part I, Item 15 of this report for additional information).
NOTE 54 - INCOME TAXES
The Company's effective tax rates for the three and six months ended June 30, 20202021 were 18.8%23.0% and 19.1%22.6%, respectively. The effective tax rates for the three and six months ended June 30, 20192020 were 22.3%18.8% and 21.9%19.1%, respectively. The provision for income taxes is based on the estimated annual effective tax rate which represents a blend of federal, state and foreign taxes and includes the impact of certain nondeductible itemsitems. The effective tax rates for the three and the impactsix months ended June 30, 2021 were impacted by $74 million and $79 million, respectively, of a change in the Company's mix of domesticreleased valuation allowance related to unrealized capital gains and foreign earnings (losses).state attributes. The effective tax rates for the three and six months ended June 30, 2020 were impacted by $64 million and $130 million, respectively, of valuation allowance related to unrealized capital losses.
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NOTE 65 - EMPLOYEE BENEFIT PLANS
Defined Benefit Pension and Other Postretirement Benefit Plans. The Company's net periodic benefit cost includes the following components for the three months ended June 30 (in millions):
Pension BenefitsOther Postretirement BenefitsAffected Line Item
in the Statements of
 Consolidated Operations
2021202020212020
Service cost$60 $53 $3 $3 Salaries and related costs
Interest cost46 56 7 7 Miscellaneous, net
Expected return on plan assets(71)(91)(1)(1)Miscellaneous, net
Amortization of unrecognized (gain) loss42 37 (7)(11)Miscellaneous, net
Amortization of prior service credit0 0 (31)(31)Miscellaneous, net
Special termination benefits0 35 0 125 Miscellaneous, net
Settlement loss — Voluntary Programs (defined below)0 71 0 0 Miscellaneous, net
Other1 11 0 0 Miscellaneous, net
Total$78 $172 $(29)$92 
  Pension Benefits Other Postretirement Benefits Affected Line Item
in the Statements of
Consolidated Operations
  2020 2019 2020 2019  
Service cost $53
 $46
 $3
 $3
 Salaries and related costs
Interest cost 56
 57
 7
 14
 Miscellaneous, net
Expected return on plan assets (91) (73) (1) (1) Miscellaneous, net
Amortization of unrecognized (gain) loss 37
 29
 (11) (15) Miscellaneous, net
Amortization of prior service credit —
 —
 (31) (9) Miscellaneous, net
Settlement loss 11
 3
 —
 —
 Miscellaneous, net
Settlement loss - VSPs (defined below) 71
 —
 —
 —
 Miscellaneous, net
Special termination benefit - VSPs 35
 —
 125
 —
 Miscellaneous, net
Total $172
 $62
 $92
 $(8)  
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The Company's net periodic benefit cost includes the following components for the six months ended June 30 (in millions):
 Pension Benefits Other Postretirement Benefits Affected Line Item
in the Statements of
Consolidated Operations		Pension BenefitsOther Postretirement BenefitsAffected Line Item
in the Statements of
 Consolidated Operations
 2020 2019 2020 2019 2021202020212020
Service cost $107
 $92
 $5
 $5
 Salaries and related costsService cost$120 $107 $5 $5 Salaries and related costs
Interest cost 112
 114
 14
 29
 Miscellaneous, netInterest cost92 112 13 14 Miscellaneous, net
Expected return on plan assets (182) (145) (1) (1) Miscellaneous, netExpected return on plan assets(142)(182)(1)(1)Miscellaneous, net
Amortization of unrecognized (gain) loss 72
 58
 (22) (30) Miscellaneous, netAmortization of unrecognized (gain) loss85 72 (14)(22)Miscellaneous, net
Amortization of prior service credit —
 —
 (62) (19) Miscellaneous, netAmortization of prior service credit0 0 (62)(62)Miscellaneous, net
Settlement loss 14
 3
 —
 —
 Miscellaneous, net
Settlement loss - VSPs (defined below) 71
 —
 —
 —
 Miscellaneous, net
Special termination benefit - VSPs 35
 —
 125
 —
 Miscellaneous, net
Special termination benefitsSpecial termination benefits0 35 46 125 Miscellaneous, net
Settlement loss — Voluntary Programs (defined below)Settlement loss — Voluntary Programs (defined below)0 710 0 Miscellaneous, net
OtherOther1 14 0 0 Miscellaneous, net
Total $229
 $122
 $59
 $(16) Total$156 $229 $(13)$59 
Given the impacts of the COVID-19 pandemic,In 2020 and 2021, the Company does not planoffered several voluntary leave programs and voluntary separation programs ("Voluntary Programs") to make any contributionscertain eligible employees, which in 2020some cases included a partially-paid leave of absence with active health benefits and travel privileges. Under these Voluntary Programs, employees generally separated (or will separate) from employment with certain post-employment health benefits and travel privileges.
Included in the Voluntary Programs offered during the first quarter of 2021, the Company offered special separation benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees. The subsidies are in the form of a one-time contribution to its two primary defined benefit pension plans, one covering certain pilota notional Retiree Health Account of $125,000 for full-time employees and another covering certain U.S. non-pilot$75,000 for part-time employees. TheAs a result, the Company does not have any minimum required contributionsrecorded $46 million for 2020.those additional benefits in the three months ended March 31, 2021.
During the second quarter of 2020, the Company offered voluntary separation programs ("VSPs")Voluntary Programs to its U.S. based front lineU.S.-based front-line employees, excluding pilots, and management and administrative employees. TheIncluded in these Voluntary Programs, the Company offered its eligible front-line employees, based on employee group, age and completed years of service, special terminationseparation benefits in the form of additional years of pension service and additional subsidies for retiree medical costs.costs (based on employee group, age and completed years of service). As a result, the Company recorded, in the second quarter of 2020, $35 million and $125 million, respectively, for those additional benefits. Also, the Company recognized a $71 million settlement loss related to the defined benefit pension plan covering certain U.S. non-pilot employees. As a result of the VSPs, the Company remeasured both its defined pension plan and its retiree medical benefit program liabilities using discount rates of 3.24% and 2.73%, respectively. As a result of the remeasurements, the projected benefit obligation of the defined pension plan increased by $655 million and the retiree medical benefit program obligation increased by $65 million, with an offset to Accumulated other comprehensive loss for both plans. The Company expects additional employee reductionsemployees in the second halfquarter of the year and, as a result, expects to record additional settlement and special termination benefits.2020.
Share-Based Compensation. InDuring the six months ended June 30, 2020, UAL granted share-based2021, UAL's Board of Directors and stockholders approved the United Airlines Holdings, Inc. 2021 Incentive Compensation Plan (the "2021 Plan"). The 2021 Plan is an incentive compensation plan that allows the Company to use different forms of equity incentives to attract, retain and reward officers and employees. Under the 2021 Plan, the Company may grant: nonqualified stock options; incentive stock options (within the
20
meaning of Section 422 of the Internal Revenue Code of 1986); stock appreciation rights ("SARs"); restricted shares; restricted stock units ("RSUs"); performance units; cash incentive awards pursuant toand other equity-based and equity-related awards. An award (other than an option, SAR or cash incentive award) may provide the holder with dividends or dividend equivalents. The 2021 Plan replaces the United Continental Holdings, Inc. 2017 Incentive Compensation Plan (the "2017 Plan"). Any awards granted under the 2017 Plan prior to the approval of the 2021 Plan remain in effect pursuant to their terms. Awards may not be granted under the 2021 Plan after May 26, 2031.
During the six months ended June 30, 2021, UAL granted share-based compensation awards pursuant to both the 2017 Plan and the 2021 Plan. These share-based compensation awards included 2.42.9 million restricted stock units ("RSUs"),RSUs, consisting of 2.11.3 million time-vested RSUs and 0.31.6 million short-term performance-based RSUs. TheA majority of the time-vested RSUs vest pro-rata, typically on February 28th of each year,equally in 25% increments every 6 months over a three-yeartwo-year period from the date of grant. The amount ofshort-term performance-based RSUs vest upon the achievement of established goals based on the Company's absolute pre-tax margin performance as well as afinancial and customer metric based on the Company's relative quarterly average of net promoter scores as compared to a group of industry peers, both of which are measuredsatisfaction metrics for the three-year performance period endingJanuary 1, 2021 to December 31, 2022.2021. 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 the 20-day average closing price of UAL common stock immediately prior to the vesting date.
The table below presents information related to share-based compensation (in millions):
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Share-based compensation expense$24
 $21
 $42
 $37
        
 June 30, 2020 December 31, 2019    
Unrecognized share-based compensation$135
 $77
    

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Share-based compensation expense$69 $24 $103 $42 
June 30, 2021December 31, 2020
Unrecognized share-based compensation$191 $88 
NOTE 7 - BRW TERM LOAN
BRW Term Loan. In November 2018, United, as lender, entered into a Term Loan Agreement (the "BRW Term Loan Agreement") with, among others, BRW Aviation Holding LLC and BRW Aviation LLC ("BRW"), as guarantor and borrower, respectively. BRW Aviation Holding LLC and BRW are affiliates of Synergy Aerospace Corporation ("Synergy"), and BRW is the majority shareholder of Avianca Holdings S.A. ("AVH"). Pursuant to the BRW Term Loan Agreement, United provided to
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BRW a $456 million term loan (the "BRW Term Loan"), secured by a pledge of BRW's equity, as well as BRW's 516 million common shares of AVH (which are eligible to be converted into the same number of preferred shares, which may be deposited with the depositary for AVH's American Depositary Receipts ("ADRs"), the class of AVH securities that trades on the New York Stock Exchange (the "NYSE"), in exchange for 64.5 million ADRs) (such shares and equity, collectively, the "BRW Loan Collateral"). BRW is currently in default under the BRW Term Loan Agreement. In order to protect the value of its collateral, on May 24, 2019, United began to exercise certain remedies available to it under the terms of the BRW Term Loan Agreement and related documents. In connection with the delivery by United of a notice of default to BRW, Kingsland Holdings Limited ("Kingsland"), AVH's largest minority shareholder, was granted, in accordance with the agreements related to the BRW Term Loan Agreement, authority to manage BRW, which remains the majority shareholder of AVH. Kingsland then continued with the foreclosure process, which was expected to result in a judicially supervised sale of the BRW Loan Collateral. However, upon the filing by AVH and certain of its affiliates of voluntary reorganization proceedings under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York on May 10, 2020 (the "AVH Reorganization Proceedings"), the New York state court judge presiding over the foreclosure proceedings agreed to stay those proceedings until later this year.
In the first quarter of 2020, United recorded a full credit loss allowance against the $515 million carrying value of the BRW Term Loan and related receivables. United recorded the allowance based on United's assessment of AVH's financial uncertainty due to its high level of leverage and the fact that the airline had ceased operations due to the COVID-19 pandemic. The credit loss allowance was recorded as part of Nonoperating income (expense): Miscellaneous, net on the Company's statements of consolidated operations. During the second quarter of 2020, AVH filed the AVH Reorganization Proceedings and, accordingly, United maintains a full loss reserve against the BRW Term Loan and related receivables.
In connection with funding the BRW Term Loan Agreement, the Company entered into certain other agreements with Kingsland. See Note 9 to the financial statements included in Part I, Item I for additional information regarding our obligations to Kingsland and their interrelationship with the BRW Term Loan Agreement.
NOTE 86 - FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
The table below presents disclosures about the financial assets and liabilities measured at fair value on a recurring basis in UAL's financial statements (in millions):
 June 30, 2020 December 31, 2019
 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Cash and cash equivalents$6,505
 $6,505
 $—
 $—
 $2,762
 $2,762
 $—
 $—
Short-term investments:               
Corporate debt558
 —
 558
 —
 1,045
 —
 1,045
 —
Asset-backed securities309
 —
 309
 —
 690
 —
 690
 —
U.S. government and agency notes81
 —
 81
 —
 124
 —
 124
 —
Certificates of deposit placed through an account registry service ("CDARS")—
 —
 —
 —
 35
 —
 35
 —
Other fixed-income securities10
 —
 10
 —
 95
 —
 95
 —
Other investments measured at net asset value ("NAV")—
 —
 —
 —
 193
 —
 —
 —
Restricted cash107
 107
 —
 —
 106
 106
 —
 —
Long-term investments:
              
Equity securities101
 101
 —
 —
 385
 385
 —
 —
AVH Derivative Assets—
 —
 —
 —
 24
 —
 —
 24
Other assets16
 —
 —
 16
 —
 —
 —
 —

Available-for-sale investment maturities - The short-term investments shown in the table above are classified as available-for-sale, with the exception of investments measured at NAV. As of June 30, 2020, asset-backed securities have remaining maturities of less than one year to approximately 14 years and corporate debt securities have remaining maturities of three years or less. U.S. government and agency notes have maturities of approximately two years or less and other fixed-income securities have maturities of less than one year.
Restricted cash - Restricted cash primarily includes collateral for letters of credit and collateral associated with facility leases and other insurance-related obligations.
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Equity securities - Equity securities represent United's investment in Azul Linhas Aéreas Brasileiras S.A. ("Azul"), consisting of a preferred equity stake of approximately 8% (approximately 2% of the total capital stock of Azul). The Company recorded $9 million of gains and $284 million of losses, respectively, during the three and six months ended June 30, 2020. The Company recorded $38 million and $52 million in gains, respectively, during the three and six months ended June 30, 2019 for changes to the fair market value of its equity investment in Azul in Unrealized gains (losses) on investments, net in the Company's statements of consolidated operations. The carrying value of our investment in Azul was $101 million at June 30, 2020.
AVH Derivative Assets - As part of the BRW Loan Agreement and related agreements with Kingsland, United obtained AVH share call options, AVH share appreciation rights and an AVH share-based upside sharing agreement (collectively, the "AVH Derivative Assets"). The AVH Derivative Assets are recorded at fair value as Other assets on the Company's balance sheet and are included in the table above. The Company recorded $24 million in losses during the six months ended June 30, 2020 and recorded $4 million and $1 million in losses, respectively, during the three and six months ended June 30, 2019, in the fair value of the AVH Derivative Assets in Unrealized gains (losses) on investments, net in the Company's statements of consolidated operations.
June 30, 2021December 31, 2020
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Cash and cash equivalents$20,838 $20,838 $0 $0 $11,269 $11,269 $0 $0 
Restricted cash - current254 254 0 0 255 255 0 0 
Restricted cash - non-current216 216 0 0 218 218 0 0 
Short-term investments:
Corporate debt199 0 199 0 330 0 330 0 
Asset-backed securities23 0 23 0 51 0 51 0 
U.S. government and agency notes8 0 8 0 33 0 33 0 
Long-term investments:
Equity securities269 269 0 0 205 205 0 0 
Warrants176 96 80 0 36 0 0 36 
Investments presented in the table above have the same fair value as their carrying value.
Restricted cash - current — Primarily includes $217 million of cash collateral for a standby letter of credit associated with guarantees related to the BRW Term Loan (as defined below). See Note 7 of this report for additional information on the BRW Term Loan and guarantees. The balance also includes amounts to be used for the payment of fees, principal and interest on senior secured notes and a secured term loan facility (the "MileagePlus Financing") secured by substantially all of the assets of Mileage Plus Holdings, LLC, a direct wholly-owned subsidiary of United.
Restricted cash - non-current — Primarily includes collateral associated with the MileagePlus Financing, collateral for letters of credit and collateral associated with facility leases and other insurance-related obligations.
Short-term investments — The short-term investments shown in the table above are classified as available-for-sale. As of June 30, 2021, corporate debt securities have remaining maturities of less than two years, asset-backed securities have remaining maturities of less than one year to approximately nine years and U.S. government and agency notes have maturities of less than one year.
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Equity securities — Equity securities represent United's investment in Azul Linhas Aéreas Brasileiras S.A. ("Azul"), consisting of approximately 8% of Azul's outstanding preferred shares (representing approximately 2% of the total capital stock of Azul), and United's ownership of less than 1% of the outstanding Class A common shares of Clear Secure, Inc. (formerly, Alclear, Inc.) ("Clear"). As of June 30, 2021, the carrying value of United's investment in Azul and Clear was $238 million and $31 million, respectively.
Warrants — Represents vested warrants for the purchase of 2.4 million shares of Class A common shares of Clear and for the purchase of 4.7 million common shares from Archer Aviation Inc. ("Archer"). The initial value of the warrants received from Archer is recorded as a deferred credit that will be recognized as a reduction to the cost of the aircraft received in future periods.
Other fair value information.The table below presents the carrying values and estimated fair values of financial instruments not presented in the tables above (in millions). Carrying amounts include any related discounts, premiums and issuance costs:
 June 30, 2020 December 31, 2019
 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$18,772
 $16,906
 $—
 $13,032
 $3,874
 $14,552
 $15,203
 $—
 $11,398
 $3,805

June 30, 2021December 31, 2020
Carrying AmountFair ValueCarrying AmountFair Value
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Long-term debt$34,184 $35,798 $0 $30,268 $5,530 $26,747 $27,441 $0 $21,985 $5,456 
Fair value of the financial instruments included in the tables above was determined as follows:
DescriptionFair Value Methodology
Cash and cash equivalentsThe carrying amounts approximate fair value because of the short-term maturity of these assets.
Short-term investments, other than Other investments measured at NAV,

Equity securities and

Restricted cash
(current and non-current)		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 NAVassetsIn accordance withFair value is determined utilizing 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. and non-U.S. public-Black-Scholes options pricing model or private-sector entities.observable market prices.
AVH Derivative AssetsFair values are calculated using a Monte Carlo simulation approach. Unobservable inputs include expected volatility, expected dividend yield and control and acquisition premiums.
Long-term debtFair 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 or assets.

Avianca Loan.Avianca Holdings S.A. ("AVH") and certain of its affiliates filed voluntary reorganization proceedings under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York on May 10, 2020 (the "AVH Reorganization Proceedings"). As part of the AVH Reorganization Proceedings, the Company has a debtor-in-possession ("DIP") term loan ("DIP Loan") receivable under the terms of the DIP credit agreement. The DIP Loan is not convertible. It bears paid-in-kind interest at a rate of 14.5% per annum and has a scheduled maturity date in November 2021. The DIP Loan becomes immediately payable upon AVH's emergence from bankruptcy, in either cash or shares of AVH stock, at AVH's election. As of June 30, 2021, the DIP Loan had a balance of $170 million and was recorded in Receivables on the Company's consolidated balance sheet.
Investments in Regional Carriers. United holds investments in several regional carriers that fly or used to fly for the Company as United Express under its capacity purchase agreements ("CPAs"). The combined carrying value of the investments was approximately $152 million as of June 30, 2021. United accounts for each investment using the equity method. Each investment and United's ownership stake are listed below.
•Champlain Enterprises, LLC ("Champlain"). United owns a 40% minority ownership stake in Champlain. Champlain does business as CommutAir. CommutAir currently operates 70 regional aircraft under a CPA that has a term through 2026.
•Republic Airways Holdings Inc. ("Republic"). United holds a 19% minority interest in Republic. Republic is the parent company of Republic Airways Inc. Republic currently operates 66 regional aircraft under a CPA that has a term through 2029.
•ManaAir, LLC ("ManaAir"). United holds a 49.9% minority ownership stake in ManaAir. ManaAir is the parent company of ExpressJet Airlines LLC ("ExpressJet"). The Company terminated its CPA with ExpressJet. ExpressJet flew its last commercial flight, on behalf of United, on September 30, 2020.
22
Other Investments. United holds other investments that are recorded at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. As of June 30, 2021, United held these major investments:
•Fulcrum BioEnergy, Inc. ("Fulcrum"). United owns approximately 7% of the preferred shares (representing approximately 6% of the total capital stock) of Fulcrum, a company that is developing a process for transforming municipal solid waste into transportation fuels, including jet fuel and diesel. As of June 30, 2021, the carrying value of United's investment was $51 million.
•Boom Technology, Inc. ("Boom"). United holds vested warrants for the purchase of 568,857 shares of common stock of Boom, a company that is developing aircraft that will fly at supersonic speeds. As of June 30, 2021, the carrying value of the warrants was $17 million. United also holds a $120 million note receivable from Boom which we recorded at its inception date fair value of $41 million. The values of the warrants and the note are recorded as deferred credits that will be recognized as a reduction to the cost of the aircraft received in future periods.
NOTE 97 - COMMITMENTS AND CONTINGENCIES
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Commitments. As of June 30, 2020,2021, United had firm commitments and options to purchase aircraft from The Boeing Company ("Boeing"),and Airbus S.A.S. ("Airbus") and Embraer S.A. ("Embraer") as presented in the table below:
    Scheduled Aircraft Deliveries
Aircraft Type Number of Firm
Commitments (a)		 Last Six Months of 2020 2021 2022 After 2022
Airbus A321XLR 50
 —
 —
 —
 50
Airbus A350 45
 —
 —
 —
 45
Boeing 737 MAX 171
 16
 24
 —
 131
Boeing 787 16
 8
 8
 —
 —
Embraer E175 20
 16
 4
 —
 —
(a) United also has options and purchase rights for additional aircraft.          

Scheduled Aircraft Deliveries
Aircraft TypeNumber of Firm
 Commitments (a)		Last Six Months
of 2021		20222023After 2023
Airbus A321XLR50 0 0 0 50
Airbus A321neo70 0 0 1654
Airbus A35045 0 0 0 45
Boeing 737 MAX380 13 40 122205
Boeing 7878 8 0 0 0 
(a) United also has options and purchase rights for additional aircraft.
The aircraft listed in the table above are scheduled for delivery through 2030. To the extent the Company and the aircraft manufacturers with whom the Company has existing orders for new aircraft agree to modify the contracts governing those orders, or to the extent rights are exercised pursuant to the relevant agreements to modify the timing of deliveries, the amount and timing of the Company's future capital commitments could change. The Company may assign the purchase obligation for each of the 20 Embraer E175 aircraft to one of its regional partners at the time of such aircraft's delivery, subject to certain conditions.
Following the Federal Aviation Administration ("FAA") order issued on March 13, 2019 prohibiting the operation of Boeing 737 MAX series aircraft by U.S. certificated operators ("FAA Order"), Boeing suspended deliveries of new Boeing 737 MAX aircraft. As a result, scheduled deliveries of Boeing 737 MAX series aircraft have been delayed, and the Company expects these delays to continue. The extent of the delay to the scheduled deliveries of new Boeing 737 MAX aircraft is expected to be impacted by the length of time the FAA Order remains in place, Boeing's production rate and the pace at which Boeing can deliver aircraft following the lifting of the FAA Order, among other factors, and these factors have been and could continue to be significantly impacted by the COVID-19 pandemic.
United also has agreementsan agreement to purchase 206 used Boeing 737-700 aircraft, which it intends to sell, with expected delivery dates in 2021. In addition, United has an agreement to purchase 11 used Airbus A319 aircraft, which it intends to sell, with expected delivery dates through 2022in 2021 and 13 used Boeing 737-700 aircraft with expected delivery dates through 2021.2022.
On April 17,In 2020, United entered into an agreementagreements with BOC Aviation (USA) Corporation ("BOCA"), a subsidiary of BOC Aviation Limited,third parties to finance through a sale and leaseback transaction 6transactions new Boeing model 787-9787 aircraft and 16 new Boeing model 737-9737 MAX aircraft subject to purchase agreements between United and Boeing. In connection with the delivery of each aircraft from Boeing, United will assignassigned its right to purchase such aircraft to BOCA,the buyer, and simultaneous with BOCA'sthe buyer's purchase from Boeing, United will enterentered into a long-term lease for such aircraft with BOCA.the buyer as lessor. NaN Boeing model 787-9 aircraft were delivered in the second quarterfirst half of 20202021 under this transactionthese transactions (and each is presently subject to a long-term lease from BOCA to United), and. Remaining aircraft in the remaining 20 aircraftagreements are scheduled to be delivered throughin the endlast six months of 2020.2021. Upon delivery of aircraft in these sale and leaseback transactions in 2021, the Company will accountaccounted for those7 of these aircraft, which have a repurchase option at a price other than fair value, as part of Flight equipment on the Company's consolidated balance sheet and the related obligation asrecorded in Other current liabilities (current and noncurrent)Other financial liabilities from sale-leasebacks (noncurrent) since they do not qualify for sale recognition. The remaining 4 aircraft in this transaction that qualifyqualified for sale recognition will bewere recorded as Operating lease right-of-use assets and lease liabilitiesCurrent/Long-term obligations under operating leases on the Company's consolidated balance sheet after recognition of related gains or losses on such sale.
In March 2020, the Company entered into a confidential settlement with Boeing with respect to compensation for financial damages incurred in 2019 due to the grounding of the Boeing 737 MAX aircraft. In June 2020, the Company entered into an amended and restated confidential agreement with Boeing which provides for the settlement of additional items related to aircraft delivery and updates the scheduled delivery for substantially all undelivered Boeing 737 MAX aircraft. The compensation to the Company under the amended and restated settlement agreement is in the form of credit memos to be issued at future dates upon the satisfaction of certain conditions related to aircraft deliveries. The Company plans to account for this settlement as a reduction to the cost basis of future firm order Boeing 737 MAX aircraft deliveries and previously-delivered Boeing 737 MAX aircraft, which is expected to reduce future depreciation expense associated with these aircraft.
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The table below summarizes United's commitments as of June 30, 2020,2021, which include aircraft and related spare engines, aircraft improvements and all non-aircraft capital commitments (in billions):
Last six months of 2020 $1.8
2021 3.5
2022 1.3
2023 2.7
2024 1.7
After 2024 13.9
  $24.9
23

Last six months of 2021$3.1 
20223.4 
20237.4 
20244.7 
20254.3 
After 202512.4 
$35.3 
Regional CPAs.The table below summarizes the Company's expected future payments through the end of the terms of our capacity purchase agreements ("CPAs"),CPAs, excluding aircraft ownership costs and variable pass-through costs such as fuel and landing fees, among others. Our future commitments under our CPAs are dependent on numerous variables, and are, therefore, difficult to predict. We have set forth below estimates based on our current assumptions of our anticipated level of flight activity or at any contractual minimum utilization levels if applicable, whichever is higher. Based on these assumptions as of June 30, 2020,2021, our estimated future payments through the end of the terms of our CPAs are presented in the table below (in billions):
Last six months of 2020 $0.9
2021 2.3
2022 2.3
2023 1.7
2024 1.6
After 2024 4.5
  $13.3

Last six months of 2021$1.1 
20222.1 
20231.9 
20241.8 
20251.5 
After 20253.7 
$12.1 
Guarantees.As of June 30, 2020,2021, United is the guarantor of approximately $1.9 billion in aggregate principal amount of tax-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 these obligations are accounted for as operating leases recognized on the Company's consolidated balance sheet with the associated expense recorded on a straight-line basis over the expected lease term. All of these bonds are due between 2023 and 2038.
In November 2018, United, as lender, entered into a Term Loan Agreement (the "BRW Term Loan Agreement") with, among others, BRW Aviation Holding LLC and BRW Aviation LLC ("BRW"), as guarantor and borrower, respectively. BRW Aviation Holding LLC and BRW are affiliates of Synergy Aerospace Corporation, and BRW is the majority shareholder of AVH. Pursuant to the BRW Term Loan Agreement, United provided to BRW a $456 million term loan (the "BRW Term Loan"). In November 2018, in connection with funding the BRW Term Loan Agreement, the Company entered into an agreement with Kingsland Holdings Limited ("Kingsland"), AVH's largest minority shareholder, pursuant to which, in return for Kingsland's pledge of its 144.8 million common shares of AVH (which are eligible to be converted into the same number of preferred shares, which may be deposited with the depositary for AVH's ADRs,American Depositary Receipts ("ADRs"), the class of AVH securities that trades on the NYSE, in exchange for 18.1 million ADRs) and its consent to BRW's pledge of its AVH common shares to United under the BRW Term Loan Agreement and related agreements, United (1) granted to Kingsland the right to put its AVH common shares to United at market price on the fifth anniversary of the BRW Term Loan Agreement or upon certain sales of AVH common shares owned by BRW, including upon a foreclosure of United's security interest, or any completed liquidation or dissolution of AVH, and (2) guaranteed BRW's obligation to pay Kingsland the difference (which amount, if paid by United, will increase the BRW Term Loan by such amount) if the market price of AVH common shares on the fifth anniversary, or upon any such sale, as applicable, is less than $12 per ADR on the NYSE, for an aggregate maximum possible combined put payment and guarantee amount on the fifth anniversary of $217 million. In 2018, the Company recorded a liability of $31 million for its guarantee to loan additional funds to BRW if required. Any such additional loans to BRW would be collateralized by BRW's AVH shares and other collateral. Due to AVH's financial uncertainty due to its high level of leverage and the fact that the airline had ceased operations due to the COVID-19 pandemic,subsequent bankruptcy filing in March 2020,2019, the Company recorded the full amount under thisof the guarantee withas a charge to income of $182liability. Additionally, the Company posted $217 million as partcash collateral for a standby letter of Nonoperating income (expense): Miscellaneous, netcredit in favor of Citibank, N.A. that serves as security for a loan from Citibank to Kingsland (recorded in Restricted cash – current on the Company's statementsconsolidated balance sheet). Any drawings under the letter of consolidated operations.credit would offset the Company's maximum possible put and guarantee payment to Kingsland by an equal amount. The posting of this collateral, and any potential credit against the Company's put and guarantee payment, are entirely related to the original transactions entered in 2018 and do not represent any new or incremental investment.
As of June 30, 2020,2021, United is the guarantor of $126$113 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 below for the Company's debt, and the Company would potentially be responsible for those costs under the guarantees.
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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 the London Interbank Offered Rate ("LIBOR")(LIBOR), for
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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 June 30, 2020,2021, the Company had $7.6$13.4 billion of floating rate debt with remaining terms of up to 12approximately 11 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 12approximately 11 years and an aggregate balance of $7.4$10.2 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.
Labor Negotiations. As of June 30, 2020,2021, the Company had approximately 91,80084,400 employees, of whom approximately 85% were represented by various U.S. labor organizations andorganizations. This total includes approximately 22% were on voluntary unpaid leaves of absence. On February 1, 2019, the collective bargaining agreement with the Air Line Pilots Association ("ALPA"), the labor union representing United's pilots, became amendable. The Company and ALPA are in negotiations for an amended agreement. The Company and UNITE HERE, the labor union representing United's Catering Operations4,500 front-line employees started negotiations for a first collective bargaining agreement in March 2019.
The collective bargaining agreement with the International Brotherhood of Teamsters ("IBT") contains provisions that requirewho elected to voluntarily separate from the Company pursuant to align contract terms with other airlines' workgroups under certain conditions,the first quarter 2021 Company-offered Voluntary Programs but who still remained on pay and a reviewbenefit continuation as of these terms is expected to occur in December 2020.June 30, 2021.
Credit Card Processing Agreements. The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of the Company's credit card processing agreements, the financial institutions in certain circumstances have the right to require that the Company maintain a reserve equal to a portion of advance ticket sales that has been processed by that financial institution, but for which the Company has not yet provided the air transportation. Such financial institutions may require cash or other collateral reserves to be established or withholding of payments related to receivables to be collected, including if the Company does not maintain certain minimum levels of unrestricted cash, cash equivalents and short-term investments.
NOTE 108 - DEBT
On April 21, 2021, United paid all amounts outstanding under the 2017 Revolving Credit Facility and the 2017 Term Loan Facility, terminated the 2017 Revolving Credit Facility and the 2017 Term Loan Facility and entered into the New Loan Facilities described below. As of June 30, 2020,2021, United had its entire capacity of $2.0 billion available under the revolving credit facility of the Revolving Credit Agreement. To maximize United's flexibility under a debt incurrence covenant contained in two of United's financings, on July 2, 2020, United took the proactive step of borrowing $1.0 billion under the Revolving Credit Agreement, which leaves $1.0$1.75 billion available for borrowing under such agreement by Unitedthe New Revolving Credit Facility at any time until April 1, 2022. Borrowings under the revolving credit facility bear interest at a variable rate equal to LIBOR (but not less than 0% per annum), plus a margin of 2.25% per annum, or (at United's election) another rate based on certain market interest rates, plus a margin of 1.25% per annum.21, 2025.
EETCs. In September 2019,February 2021, United created enhanced equipment trust certificate ("EETC")EETC pass-through trusts each of which issued pass-through certificates. The proceeds from the issuance of the pass-through certificates are used to purchase equipment notes issued by United and secured by its aircraft financed with the proceeds of such notes. 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 of 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 United's assets. Certain details of the pass-through trusts with proceeds received from issuance of debt in 20202021 are as follows (in millions, except stated interest rate):
EETC Issuance Date Class Face Amount Stated interest rate Total proceeds received from issuance of debt during 2020 Total debt recorded as of June 30, 2020
September 2019 AA $702
 2.70% $189
 $702
September 2019 A 287
 2.90% 77
 287
September 2019 B 232
 3.50% 62
 232
    $1,221
   $328
 $1,221

EETC Issuance DateClassFace AmountStated interest rateTotal proceeds received from issuance of debtTotal debt recorded as of
June 30, 2021
February 2021B$600 4.88%$600 $600 
Used Aircraft Facility.PSP2 Note. On March 9, 2020, the Company entered into a Term Loan Credit and Guaranty Agreement (the "Used Aircraft Credit Agreement"), among United, as borrower, UAL, as parent and guarantor, the subsidiaries of UAL other than
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United party thereto from time to time, as guarantors, the lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent. The obligations of United under the Used Aircraft Credit Agreement are secured by liens on certain aircraft of United and certain related assets. United borrowed the full amount of $2 billion under the Used Aircraft Credit Agreement (the "Used Aircraft Facility"). The principal amount of the Used Aircraft Facility must be repaid in a single installment on the maturity date on March 8, 2021. Borrowings under the Used Aircraft Credit Agreement bear interest at a variable rate equal to LIBOR (but not less than 1% per annum), plus a margin of 2.00%, 2.25% or 2.50% per annum, or (at United's election) another rate based on certain market interest rates, plus a margin of 1.00%, 1.25% or 1.50% per annum, in each case, with such incremental increase to the margin occurring at 180 days and 270 days, as applicable. The Used Aircraft Credit Agreement includes covenants that restrict the Company's ability to, among other things, make investments and to pay dividends on, or to repurchase, UAL common stock. In addition, the Used Aircraft Credit Agreement requires the Company to maintain unrestricted cash and cash equivalents and unused commitments available under all revolving credit facilities aggregating not less than $2.0 billion and to maintain a minimum ratio of appraised value of collateral to outstanding obligations under the Used Aircraft Credit Agreement of 1.60 to 1. If the Company does not meet the minimum collateral coverage ratio when required, it must either provide additional collateral to secure its obligations under the Used Aircraft Credit Agreement or repay the loans under the Used Aircraft Credit Agreement (or both) to the extent necessary to maintain compliance with the collateral coverage ratio.
Spare Parts Facility. On March 20, 2020, the Company entered into a Term Loan Credit and Guaranty Agreement (the "Spare Parts Credit Agreement"), among United, as borrower, UAL, as parent and guarantor, the subsidiaries of UAL other than United party thereto from time to time, as guarantors, the lenders party thereto from time to time and Goldman Sachs Bank USA, as administrative agent. The obligations of United under the Spare Parts Credit Agreement are secured by liens on certain spare parts of United and certain related assets. United borrowed the full amount of $500 million under the Spare Parts Credit Agreement (the "Spare Parts Facility"). The principal amount of the Spare Parts Facility must be repaid in a single installment on the maturity date on March 22, 2021. Borrowings under the Spare Parts Credit Agreement bear interest at a variable rate equal to LIBOR (but not less than 1% per annum), plus a margin of 2.75%, 3.00%, 3.25% or 3.50% per annum, or (at United's election) another rate based on certain market interest rates, plus a margin of 1.75%, 2.00%, 2.25% or 2.50% per annum, in each case, with such incremental increase to the margin occurring at 90 days, 180 days and 270 days, as applicable. The Spare Parts Credit Agreement includes covenants that restrict the Company's ability to, among other things, make investments and to pay dividends on, or to repurchase, UAL common stock. In addition, the Spare Parts Credit Agreement requires the Company to maintain unrestricted cash and cash equivalents and unused commitments available under all revolving credit facilities aggregating not less than $2.0 billion and to maintain a minimum ratio of appraised value of collateral to outstanding obligations under the Spare Parts Credit Agreement of 1.80 to 1 or, if certain types of spare parts are used in calculating such collateral coverage ratio, 2.00 to 1. If the Company does not meet the minimum collateral coverage ratio when required, it must either provide additional collateral to secure its obligations under the Spare Parts Credit Agreement or repay the loans under the Spare Parts Credit Agreement (or both) to the extent necessary to maintain compliance with the collateral coverage ratio.
Spare Engines Facility. On April 7, 2020, the Company entered into a Term Loan Credit and Guaranty Agreement (the "Spare Engines Credit Agreement"), among United, as borrower, UAL, as parent and guarantor, the subsidiaries of UAL other than United party thereto from time to time, as guarantors, the lenders party thereto from time to time and Bank of America, N.A., as administrative agent. The obligations of United under the Spare Engines Credit Agreement are secured by liens on certain spare engines of United and certain related assets. United borrowed the full amount of $250 million under the Spare Engines Credit Agreement (the "Spare Engines Facility"). The principal amount of the Spare Engines Facility must be repaid in a single installment on the maturity date on April 6, 2021. Borrowings under the Spare Engines Credit Agreement bear interest at a variable rate equal to LIBOR (but not less than 1% per annum), plus a margin of 3.00%, 3.25% or 3.50% per annum, or (at United's election) another rate based on certain market interest rates, plus a margin of 2.00%, 2.25% or 2.50% per annum, in each case, with such incremental increase to the margin occurring at 180 days and 270 days, as applicable. The Spare Engines Credit Agreement includes covenants that restrict the Company's ability to, among other things, make investments and to pay dividends on, or to repurchase, UAL common stock. In addition, the Spare Engines Credit Agreement requires the Company to maintain unrestricted cash and cash equivalents and unused commitments available under all revolving credit facilities aggregating not less than $2.0 billion and to maintain a minimum ratio of appraised value of collateral to outstanding obligations under the Spare Engines Credit Agreement of 1.40 to 1. If the Company does not meet the minimum collateral coverage ratio when required, it must either provide additional collateral to secure its obligations under the Spare Engines Credit Agreement or repay the loans under the Spare Engines Credit Agreement (or both) to the extent necessary to maintain compliance with the collateral coverage ratio.
PSP Note.During During the secondquarter of 2020, pursuant to the PSP Agreement and in connection with the U.S. Treasury Department providing the Company with total funding of approximately $5.0 billion under the Payroll Support Program of the CARES Act,six months ended June 30, 2021, UAL issued a promissory notean $870 million PSP2 Note to the U.S. Treasury Department evidencing senior unsecured indebtedness of UAL of approximately $1.3 billion.UAL. The principal amount of the PSP Note will increase in an amount equal to 30% of any
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disbursement made by the U.S. Treasury Department to United under the PSP Agreement after June 30, 2020. The remaining disbursement is expected by the end of July 2020. The aggregate principal amount of the PSP Note after all disbursements will be approximately $1.5 billion.
The PSPPSP2 Note is guaranteed by United and will mature ten years after the initial issuance on April 20, 2030.January 15, 2031 (the "PSP2 Note Maturity Date"). If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness of UAL with a principal balance in excess of a specified amount, or if certain subsidiaries are formed or acquired,then such subsidiary shall be required to guarantee the obligations of UAL under the PSPPSP2 Note. UAL may, at its option, prepay the PSPPSP2 Note, at any time, and from time to time, at par. UAL is required to prepay the PSPPSP2 Note upon the occurrence of certain change of control triggering events. The PSPPSP2 Note does not require any amortization and is to be repaid in full on the maturity date.
PSP2 Note Maturity Date. Interest on the PSPPSP2 Note is payable semi-annually in arrears on the last business day of March and September of each year, beginning on March 31, 2021, at a rate of 1.00% in years 1 through 5, and at the Secured Overnight Financing Rate (SOFR) plus 2.00% in years 6 through 10.
PSP3 Note. Duringthe second quarter of 2021, UAL issued an $810 million PSP3 Note to Treasury evidencing senior unsecured indebtedness of UAL. The PSP3 Note is guaranteed by United and will mature ten years after issuance on April 29, 2031 (the "PSP3 Note Maturity Date"). If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness
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of UAL with a principal balance in excess of a specified amount, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP3 Note. UAL may, at its option, prepay the PSP3 Note, at any time, and from time to time, at par. UAL is required to prepay the PSP3 Note upon the occurrence of certain change of control triggering events. The PSP3 Note does not require any amortization and is to be repaid in full on the PSP3 Note Maturity Date. Interest on the PSP3 Note is payable semi-annually in arrears on the last business day of March and September of each year, beginning on September 30, 20202021, at a rate of 1.00% in years one1 through five,5, and at the Secured Overnight Financing Rate (SOFR) plus 2%2.00% in years six6 through ten.10.
MileagePlus Financing.NotesOn July 2, 2020, MPH and MIPA (the "Issuers") issued $3.8 billion aggregate principal amount of their 6.50% Senior Secured Notes due 2027 (the "Notes"). The Notes have a fixed annual interest rate of 6.50%, which will be paid in cash, quarterly in arrears on March 20, June 20, September 20 and December 20 of each year, beginning on September 21, 2020 (each a "Payment Date"). Concurrently with the issuance of the Notes, the Issuers entered into a credit agreement (the "Credit Agreement") that provides for a term loan facility in an aggregate principal amount of up to $3.0 billion (the "Term Loan Facility"). On July 2, 2020, the Issuers borrowed $3.0April 21, 2021, United issued, through a private offering to eligible purchasers, $4.0 billion in aggregate principal amount underof two series of Notes, consisting of $2.0 billion in aggregate principal amount of the Term2026 Notes and $2.0 billion in aggregate principal amount of the 2029 Notes. The 2026 Notes, issued at a price of 100% of their principal amount, bear interest at a rate of 4.375% per annum and will mature on April 15, 2026. The 2029 Notes, issued at a price of 100% of their principal amount, bear interest at a rate of 4.625% per annum and will mature on April 15, 2029. The Notes are guaranteed on an unsecured basis by UAL.
New Loan Facility. Loans outstanding underFacilities. Concurrently with the closing of the offering of the Notes, United also entered into the New Loan Facilities, consisting of the New Term Loan Facility willinitially providing New Term Loans up to an aggregate amount of $5.0 billion and the New Revolving Credit Facility initially providing revolving loan commitments of up to $1.75 billion. United borrowed the full amount of the New Term Loans on April 21, 2021, which bear interest at a variable rate equal to LIBOR (but not less than 1.0%0.75% per annum), plus a margin of 5.25%3.75% per annum, payable on each Payment Date. The principal on the Notes and the Term Loan Facility will be repaid in quarterly installments on each Payment Date, beginning on September 20, 2022. The scheduled maturity date of the Notes and of the Term Loan Facility is June 20, 2027. The Issuers lent the proceeds of the Notes and of the Term Loan Facility to United, after depositing a portion of such proceeds in reserve accounts to cover future interest payments. The Notes and the loans under the Term Loan Facility are guaranteed by UAL, United and certain other subsidiaries of UAL.
Bridge Loan.On June 30, 2020, the Company entered into a $200 million Term Loan Credit and Guaranty Agreement (the "Bridge Loan"), among United, as borrower, UAL, as parent and guarantor, and Barclays Bank PLC, as administrative agent. The obligations of United under the Bridge Loan are secured by liens on certain routes of United between cities in the U.S. and Europe, South America, and Mexico. United borrowed the full amount of the Bridge Loan on July 1, 2020.annum. The principal amount of the BridgeNew Term Loan Facility must be repaid in a single installment onconsecutive quarterly installments of 0.25% of the maturity date of September 29, 2020.original principal amount thereof with the balance due at maturity. Borrowings under the Bridge LoanNew Revolving Credit Facility bear interest at a variable rate equal to LIBOR (but not less than 1.00% per annum) plus 1.75% per annum or (at United's election) another rate based on certain market interest rates, plus a margin of 3.00% to 3.50% per annum. United pays a commitment fee equal to 0.75% per annum.annum on the undrawn amount available under the New Revolving Credit Facility.
SeveralUnited used the net proceeds from the offering of the Company's debt agreements contain covenants that,Notes and borrowings under the New Term Loan Facility (i) to repay in full all of the Existing Loan Facilities, including the $1.4 billion aggregate principal amount outstanding under the 2017 Term Loan Facility, the $1.0 billion aggregate principal amount outstanding under the 2017 Revolving Credit Facility and the $520 million aggregate principal amount outstanding under the CARES Act Loan, (ii) to pay fees and expenses relating to the offering of the Notes and (iii) for United's general corporate purposes. As a result of such repayments, the Existing Loan Facilities were terminated on April 21, 2021 and no further borrowings may be made thereunder.
The Notes and the New Loan Facilities are secured on a senior basis by security interests granted by United to the collateral trustee for the benefit of the holders of the Notes and the lenders under the New Loan Facilities, among other things, restrictparties, on the abilityfollowing: (i) all of United's route authorities granted by the CompanyU.S. Department of Transportation to operate scheduled service between any international airport located in the United States and any international airport located in any country other than the United States (except Cuba), (ii) United's rights to substantially all of its subsidiarieslanding and take-off slots at foreign and domestic airports, including at John F. Kennedy International Airport, LaGuardia Airport and Ronald Reagan Washington National Airport (subject to incur additional indebtedness. certain exclusions), and (iii) United's rights to use or occupy space at airport terminals, each to the extent necessary at the relevant time for servicing scheduled air carrier service authorized by an applicable route authority.
As of June 30, 2020,2021, UAL and United were in compliance with their respective debt covenants.
The table below presents the Company's contractual principal payments (not including $600 million of unamortized debt discount, orpremiums and debt issuance costs and any debt entered into after the balance sheet date)costs) at June 30, 20202021 under then-outstanding long-term debt agreements (in millions):
Last six months of 2020 $898
2021 4,298
2022 1,807
2023 857
2024 3,164
After 2024 7,934
  $18,958

Last six months of 2021$1,001 
20222,967 
20232,847 
20243,908 
20253,378 
After 202520,683 
$34,784 
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NOTE 119 - SPECIAL CHARGES (CREDIT)(CREDITS)
For the three and six months ended June 30, special charges (credit)(credits), unrealized (gains) losses on investments, debt extinguishment and modification fees, special termination benefits and pension settlement losses unrealized gains and losses on investments and certain credit losses in the statements of consolidated operations consisted of the following (in millions):
26
Three Months Ended
June 30,		Six Months Ended
June 30,
2021202020212020
CARES Act grant$(1,079)$(1,589)$(2,889)$(1,589)
Impairment of assets59 80 59 130 
Severance and benefit costs11 63 428 63 
(Gains) losses on sale of assets and other special charges61 (3)77 10 
Total operating special charges (credits)(948)(1,449)(2,325)(1,386)
Nonoperating unrealized (gains) losses on investments, net(147)(9)(125)310 
Nonoperating debt extinguishment and modification fees62 0 62 0 
Nonoperating special termination benefits and settlement losses0 231 46 231 
Nonoperating credit loss on BRW Term Loan and related guarantee0 0 0 697 
Total nonoperating special charges and unrealized (gains) losses on investments, net(85)222 (17)1,238 
Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net(1,033)(1,227)(2,342)(148)
Income tax expense (benefit), net of valuation allowance203 241 494 227 
Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net of income taxes$(830)$(986)$(1,848)$79 
2021
CARES Act grant. During the six months ended June 30, 2021, the Company received approximately $5.8 billion in funding pursuant to the PSP2 Agreement and the PSP3 Agreement, which included an approximately $1.7 billion unsecured loan. The Company recorded $1.1 billion and $2.9 billion as grant income in Special charges (credits) during the three and six months ended June 30, 2021, respectively. The Company also recorded $52 million and $99 million for the PSP2 Warrants and PSP3 Warrants issued to Treasury as part of the PSP2 Agreement and PSP3 Agreement, within stockholders' equity, as an offset to the grant income in the three and six months ended June 30, 2021, respectively. The Company deferred recognition of $1.1 billion of the funds received under the PSP3 Agreement as of June 30, 2021 as the funds can only be used for the payment of eligible salaries, wages and benefits. The Company expects the remainder of the PSP3 Agreement funds will be recognized as income in the third quarter of 2021.
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
CARES Act grant$(1,589) $—
 $(1,589) $—
Impairment of assets80
 61
 130
 69
Severance and benefit costs63
 6
 63
 12
(Gains) losses on sale of assets and other special charges(3) 4
 10
 8
Total operating special charges (credit)(1,449) 71
 (1,386) 89
Nonoperating special termination benefits and settlement losses231
 —
 231
 —
Nonoperating unrealized (gains) losses on investments(9) (34) 310
 (51)
Nonoperating credit loss on BRW Term Loan and related guarantee—
 —
 697
 —
Total nonoperating special charges (credit) and unrealized (gains) losses on investments222
 (34) 1,238
 (51)
Total operating and nonoperating special charges (credit) and unrealized (gains) losses on investments(1,227) 37
 (148) 38
Income tax expense (benefit), net of valuation allowance241
 (8) 227
 (8)
Total operating and nonoperating special charges (credit) and unrealized (gains) losses on investments, net of income taxes$(986)
$29
 $79
 $30
Impairment of assets. During the three and six months ended June 30, 2021, the Company recorded $59 million of impairments primarily related to 64 Embraer EMB 145LR aircraft and related engines that United retired from its regional aircraft fleet. The decision to retire these aircraft was triggered by the United Next aircraft order. In February 2021, the Company voluntarily and temporarily removed all 52 Boeing 777-200/200ER aircraft powered by Pratt & Whitney 4000 series engines from its schedule due to an engine failure incident with one of its aircraft. The Company viewed this incident as an indicator of potential impairment. Accordingly, as required under relevant accounting standards, United performed forecasted cash flow analyses and determined that the carrying value of the Boeing 777-200/200ER fleet is expected to be recoverable from future cash flows expected to be generated by that fleet and, consequently, no impairment was recorded.

Severance and benefit costs. During the three and six months ended June 30, 2021, the Company recorded charges of $11 million and $428 million, respectively, related to pay continuation and benefits-related costs provided to employees who chose to voluntarily separate from the Company. The Company offered, based on employee group, age and completed years of service, pay continuation, health care coverage, and travel benefits. Approximately 4,500 employees elected to voluntarily separate from the Company.
(Gains) losses on sale of assets and other special charges. During the three and six months ended June 30, 2021, the Company recorded charges of $61 million and $77 million, respectively, primarily related to incentives for certain of its front-line employees to receive a COVID-19 vaccination and the termination of the lease associated with three floors of its headquarters at the Willis Tower in Chicago in the first quarter of 2021.
Nonoperating unrealized losses on investments, net. During the three and six months ended June 30, 2021, the Company recorded $90 million of gains related to its equity investments and warrants in the equity of Clear. Clear undertook its initial public stock offering in June 2021. Also during the three and six months ended June 30, 2021, the Company recorded gains of $57 million and $35 million, respectively, primarily for the change in the market value of its investment in Azul.
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Nonoperating debt extinguishment and modification fees. During the three and six months ended June 30, 2021, the Company recorded $62 million of charges for fees and discounts related to the issuance of the New Loan Facilities and the prepayment of the Existing Loan Facilities.
Nonoperating special termination benefits. During the six months ended June 30, 2021, as part of the first quarter Voluntary Programs, the Company recorded $46 million of special termination benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees. The subsidies were in the form of a one-time contribution into the employee's Retiree Health Account of $125,000 for full-time employees and $75,000 for part-time employees.
2020
CARES Act grant. During the three and six months ended June 30, 2020, the Company received approximately $4.5 billion in funding pursuant to the Payroll Support Program under the CARES Act,PSP1, which consistsconsisted of a $3.2 billion in a grant and $1.3a $1.3 billion in an unsecured loan. The Company recorded $57 million in warrants issued to the U.S. Treasury Department, within stockholder's equity, as an offset to the grant proceeds. As of June 30, 2020, we recognized $1.6 billion of the grant as a credit to Special charges (credit) with the remaining $1.5 billion recordedand $57 million in warrants issued to Treasury, within stockholder's equity, as Payroll Support Program deferred credit on our balance sheet. We expectan offset to recognize the remainder of the grant proceeds, including additional proceeds expected in July 2020, from the Payroll Support Program as Special charge (credit) by the end of 2020 as the salaries and wages the grant is intended to offset are incurred.income.
Impairment of assets. United assesses its goodwill and intangible assets for potential impairment on an annual basis as of October 1, and on an interim basis if there are indicators that an impairment of goodwill or the intangible assets may have occurred. In the first quarter of 2020, the Company evaluated its goodwill and intangible assets for possible impairments due to the impact of the COVID-19 pandemic on UAL's market capitalization and cash flow projections. For goodwill and certain of its intangible assets, including the Company's China routes, London-Heathrow slots, alliances and the United trade name and logo, 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 and, in the case of goodwill, comparing the Company's fair value to its 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 remain suppressed for the remainder of 2020 and likely into 2021. These assumptions are inherently uncertain as they relate to future events and circumstances. In the second quarter of 2020, the Company again quantitatively assessed its goodwill and China routes using the methodologies described above. There was not a need to quantitatively assess the other intangible assets for impairment.
In light of the ongoing impact of the COVID-19 pandemic on both the U.S. and global economies, the significant, sustained impact on the demand for travel and government policies that restrict air travel, the exact timing of the recovery from the COVID-19 pandemic, and the speed at which such recovery could occur, continues to remain uncertain and could result in additional impairment charges in the future. We expect to continue to modify our cost management structure, liquidity-raising efforts and capacity as the timing of demand recovery becomes more certain.
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As a result of the impairment assessments, the Company determined that its China routes fair value was less than its carrying value as of March 31, 2020 and June 30, 2020. Accordingly, duringDuring the three and six months ended June 30, 2020, the Company recorded impairment charges of $80 million and $130 million, respectively, for its China routes, which was primarily caused by the COVID-19 pandemic and the Company's subsequent suspension of flights to China. The Company's China routes are subject to usage requirements imposed by the U.S. and Chinese governments. For the summer 2020 season, both governments have issued relief from their frequency and slot usage requirements. The Company, therefore, has been able to reduce its mainland China service without violating the governments' rules. The Company is advocating for a continuation of this relief through the winter 2020/2021 season. The additional impairment in the second quarter of 2020 was the result of a further delay in the expected return of full capacity to the China markets. As of June 30, 2020, the fair value of the China routes was approximately $1.0 billion. No other impairments were recorded.
In the first quarter of 2020, in response to decreased demand caused by the COVID-19 pandemic, the Company temporarily grounded certain of its mainline fleet, and those aircraft continue to be temporarily grounded. In the first quarter of 2020, as required under relevant accounting standards, United performed forecasted cash flow analyses and determined that the carrying value of the tested fleets is recoverable from future cash flows expected to be generated by those fleets. To determine whether impairments exist for active and temporarily parked aircraft, we group assets at the fleet-type level. To the extent we make decisions to permanently ground any of our fleet, or our estimates of future cash flows generated by our fleet change, we may be required to record impairment charges in future periods. There were no new impairment indicators related to the temporarily-grounded aircraft in the second quarter of 2020.
Severance and benefit costscosts.. During the three and six months ended June 30, 2020, the Company recorded $63 million related to pay continuation and benefits provided to employees thatwho chose to voluntarily separate from the Company.
Nonoperating unrealized losses on investments, net. During the three and six months ended June 30, 2020, the Company recorded gains of $9 million and losses of $310 million, respectively. The losses in the six months ended June 30, 2020 were primarily due to the $284 million decrease in the market value of the Company's investment in Azul and the $24 million decrease in the fair value of the AVH share call options, AVH share appreciation rights and AVH share-based upside sharing agreement.
Nonoperating special termination benefits and settlement losses. During the three and six months ended June 30, 2020, the Company recorded $231 million of settlement losses related to the Company's primary defined benefit pension plans covering certain U.S. non-pilot employees, and special termination benefits offered under voluntary separationleave programs to certain front-line U.S. based employees participating in the non-pilot defined benefit pension plan and postretirement medical programs. See Note 6 to the financial statements included in Part I, Item 1 for additional information.
Nonoperating unrealized gains (losses) on investments, net. During the three and six months ended June 30, 2020, the Company recorded gains of $9 million and losses of $310 million, respectively. The six months ended June 30, 2020 losses were primarily due to $284 million decrease in the market value of its investment in Azul and $24 million for the decrease in fair value of the AVH Derivative Assets.
Nonoperating credit loss on BRW Term Loan and related guarantee. During the six months ended June 30, 2020, the Company recorded a $697 million expected credit loss allowance for the BRW Term Loan and related guarantee. United recorded the allowance based on United's assessment of AVH's financial uncertainty due to its high level of leverage and the fact that the airline had ceased operations due to the COVID-19 pandemic. BRW's equity and BRW's holdings of AVH equity are secured as a pledge under the BRW Term Loan, which is currently in default.
2019
Impairmentbankruptcy. See Notes 6 and 7 of assets. During the three months ended June 30, 2019, the Company recorded a $47 million impairmentthis report for aircraft engines removed from operations, a $6 million charge for the early termination of several regional aircraft finance leases and $8 million in other miscellaneous impairments. During the six months ended June 30, 2019, in addition to the charges described above, the Company recorded an $8 million fair value adjustment for aircraft purchased off lease.additional information.
Severance and benefit costs
. During the three and six months ended June 30, 2019, the Company recorded management severance of $6 million and $10 million, respectively. During the six months ended June 30, 2019, the Company recorded $2 million of severance and benefit costs related to a voluntary early-out program for its technicians and related employees represented by the International Brotherhood of Teamsters (the "IBT"). In the first quarter of 2017, approximately 1,000 technicians and related employees elected to voluntarily separate from the Company and received a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through early 2019.
Nonoperating unrealized gains (losses) on investments, net. During the three and six months ended June 30, 2019, the Company recorded gains of $38 million and $52 million, respectively, for the change in market value of its investment in Azul. Also, during the three and six months ended June 30, 2019, the Company recorded losses of $4 million and $1 million, respectively, for the change in fair value of the AVH Derivative Assets. For equity investments and derivative assets subject to MTM accounting, the Company records gains and losses as part of Nonoperating income (expense): Miscellaneous, net in its statements of consolidated operations.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
United Airlines Holdings, Inc. (together with its consolidated subsidiaries, "UAL" or the "Company") is a holding company, and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, "United"). This Quarterly Report on Form 10-Q is a combined report of UAL and United, including their respective consolidated financial statements. As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United's operating revenues and operating expenses comprise nearly 100% of UAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL's assets, liabilities and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words "we," "our," "us," and the "Company" in this report for disclosures that relate to all of UAL and United.
The Company transports people and cargo through its mainline operations, which utilize jet aircraft with at least 126 seats, and regional operations, which utilize smaller aircraft that are operated under contract by United Express carriers. The Company serves virtually every major market around the world, either directly or through participation in Star Alliance®, the world's largest airline alliance.
Impact of the COVID-19 Pandemic and Outlook
In December 2019, aThe novel strain of coronavirus ("COVID-19") was reported(COVID-19) pandemic, together with the measures implemented or recommended by governmental authorities and private organizations in Wuhan, China,response to the pandemic, has had an adverse impact that has been material to the Company's business, operating results, financial condition and the World Health Organization subsequently declared COVID-19 a "pandemic." As a result of COVID-19, the U.S. government declared a national emergency, the U.S. Department of State issued numerous travel advisories, including a global Level 4 "do not travel" advisory advising U.S. citizens to avoid all international travel, and the U.S. government has implemented a number of travel-related protocols, including enhanced screenings and mandatory 14-day quarantines. Many foreign and U.S. state and local governments have instituted similar measures and declared states of emergency.
In the United States and other locations around the world, throughout the first half of 2020, people were instructed to stay home or "shelter in place" and public events, such as conferences, sporting events and concerts, have been canceled, attractions, including theme parks and museums, have been closed, cruise lines have suspended operations and schools and businesses are operating with remote attendance, among other actions. In addition, governments, non-governmental organizations and entities in the private sector have issued non-binding advisories or recommendations regarding air travel or other social distancing measures, including limitations on the number of persons that should be present at public gatherings. While "shelter in place" restrictions and similar advisories and recommendations have been reduced or otherwise eased in certain circumstances, this varies by jurisdiction and organization. In addition, numerous jurisdictions have imposed or reinstated more severe restrictions as a result of the continued spread of COVID-19 or resurgences in the severity of COVID-19 in certain locations, including travel restrictions, mandatory self-quarantine requirements and other enhanced COVID-19-related screening measures that may apply to our personnel and/or the traveling public.
liquidity. The Company began experiencing a significant decline in international and domestic demand related to COVID-19 during the first quarter of 2020. The decline in demand caused a material deterioration in our revenues in the first half of 2020, resulting in a net loss of $3.3 billion for that period. Although during the second quarter of 2020 the Company experienced modest, but steady improvement in demand, the Company has since experienced reduced demand and increased cancellations to destinations experiencing increases in COVID-19 cases and/or new quarantine requirements imposed in certain jurisdictions or other restrictions on travel. As a result, the full extent of the ongoing impact of COVID-19 on the Company's longer-term operational and financial performance will depend on future developments, many of which areincluding those outside of our control related to the efficacy and allspeed of which are highly uncertainvaccination programs in curbing the spread of the virus in different markets, the introduction and cannotspread of new variants of the virus that may be predicted; however,resistant to currently approved vaccines and the continuation of existing or implementation of new government travel restrictions.
Capacity.The Company began experiencing a significant decline in international and domestic travel demand related to COVID-19 during the first quarter of 2020, and this reduction in demand has continued through the date of this report. However, since March 2021, the Company currently expects our results of operationshas seen increasing demand for full-year 2020 to be materially impactedtravel both domestically and that we will incur a net loss for the full-year 2020.
In response to decreased demand, thein countries where entry is permitted. The Company cut, relative to second quarter 2019 capacity, approximately 88%46% of its scheduled capacity for the second quarter of 2020. The Company2021 and expects its third quarter scheduled capacity to be down approximately 65% year-over-year in26% versus the third quarter of 2020.2019. The Company also expects its scheduled capacity in the fourth quarter of 2020 to be generally consistent with the third quarter of 2020. The Company plans towill continue to proactively evaluatemonitor booking trends for future travel and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand. The Company expects demand to remain suppressed until a widely accepted treatment and/or vaccine for COVID-19 is available. In addition, the Company does not currently expect the recovery from COVID-19 to follow a linear path.adjust its capacity as needed.
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Cost Reductions.The Company has takenidentified over $2.0 billion of annual permanent structural cost reductions including improvements in labor efficiencies. During the first quarter of 2021, the Company offered voluntary leaves of absences to certain U.S.-based front-line employees. This program included (based on employee group, age and completed years of service) a partially-paid leave of absence with active health care coverage and travel privileges. Employees who separate from the Company after the end of such program receive certain separation benefits, such as post-employment health benefits and travel privileges. Approximately 4,500 employees elected to participate in this program, and it is expected that the majority of them will separate from employment at the end of their leave of absence. See Note 5 and Note 9 to the financial statements included in Part I, Item 1 of this report for additional information on charges related to these programs.
Liquidity. The Company entered into a number of actionstransactions to improve its liquidity and manage its capital. In the first half of 2021, the Company:
•issued, through a private offering to eligible purchasers, $4.0 billion in response to the decreased demand for air travel. In addition to the schedule reductions discussed above, the Company has:
•
reduced its planned capital expenditures and reduced operating expenditures for the remainder of 2020 and 2021 (including by postponing projects deemed non-critical to the Company's operations);
•
terminated its share repurchase program;
asaggregate principal amount of July 2, 2020, issued or entered into approximately $10.0two series of notes, consisting of $2.0 billion ($3.0 billion through June 30, 2020) in secured notes, secured term loan facilities and new aircraft financings, including $6.8 billionaggregate principal amount of 4.375% senior secured notes due 2026 (the "2026 Notes") and $2.0 billion in aggregate principal amount of 4.625% senior secured notes due 2029 (the "2029 Notes" and, together with the 2026 Notes, the "Notes," and each a "series" of Notes);
•entered into a new Term Loan Credit and Guaranty Agreement (the "New Term Loan Facility") initially providing term loans up to an aggregate amount of $5.0 billion and a securednew Revolving Credit and Guaranty Agreement (the "New Revolving Credit Facility" and, together with the New Term Loan Facility, the "New Loan Facilities") initially providing revolving loan commitments of up to $1.75 billion;
•repaid in full the $1.4 billion aggregate principal amount outstanding under the term loan facility (the "MileagePlus Financing""2017 Term Loan Facility") secured by substantially all of the assets of Mileage Plus Holdings, LLC, a direct wholly-owned subsidiary of United ("MPH"), and Mileage Plus Intellectual Property Assets, Ltd., an indirect wholly-owned subsidiary of MPH ("MIPA");
raised approximately $1.1 billionincluded in cash proceeds in an underwritten public offering of UAL common stock;
entered into an equity distribution agreement relating to the issuance and sale, from time to time, of up to 28 million shares of UAL common stock;
borrowed, on July 2, 2020, $1.0 billion under the $2.0 billion revolving credit facility of the Amended and Restated Credit and Guaranty Agreement, dated as of March 29, 2017 (the "Revolving"Existing Credit Agreement");
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•repaid in full the $1.0 billion aggregate principal amount outstanding under the revolving credit facility (the "2017 Revolving Credit Facility") included in the Existing Credit Agreement;
•repaid in full the $520 million aggregate principal amount outstanding under the Loan and Guarantee Agreement, dated as of September 28, 2020, among United, UAL, the U.S. Treasury Department ("Treasury") and the Bank of New York Mellon, as administrative agent, as amended (the "CARES Act Loan"), which was entered into an agreementpursuant to finance certain aircraft currently subjectthe loan program established pursuant to purchase agreements through a sale and leaseback transaction;
elected to defer the payment of $78 million in payroll taxes incurred through June 30, 2020, as provided by the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), until 2021 and 2022;
temporarily grounded certain of its mainline fleet; and
taken a number of actions to reduce employee-related costs, including, among other items, the Company's Chief Executive Officer and President waived 100% of their respective base salaries through 2020, other officers temporarily waived a portion of their base salaries, the Company's non-employee directors waived 100% of their cash compensation for the second and third quarters of 2020, the Company suspended merit salary increases and implemented a temporary four-day work week for management and administrative employees and the Company offered voluntary unpaid leaves of absence.
On July 8, 2020, in order to comply with various labor regulations in certain jurisdictions, including pursuant to the Worker Adjustment and Retraining Notification Act, United informed approximately 36,000 U.S.-based employees, either directly or through a union representative, of plans to implement a workforce reduction at their work locations. These notices are part of the Company's strategic realignment of its business and new organizational structure as a result of the impacts of the COVID-19 pandemic on the Company's operations and cost structure. The Company expects that these actions will take effect on or after October 1, 2020 and may continue through the end of 2020. The COVID-19 pandemic is an act of nature and is a circumstance beyond the Company's control, which is further compounded by governmental restrictions on travel and stay-at-home orders that have substantially reduced bookings and the demand for airline travel, resulting in the temporary grounding of a substantial number of the Company's aircraft.;
The Company continues to focus on reducing expenses•entered into approximately $0.6 billion in new enhanced equipment trust certificates ("EETC"); and managing its liquidity. We expect to continue to modify our cost management structure, liquidity-raising efforts and capacity as the timing of demand recovery becomes more certain.
The Company currently expects daily cash burn during the third quarter of 2020 to average•raised approximately $25 million per day. For this purpose, "cash burn" is defined as$0.5 billion in net cash from operations, less investing and financing activities. Proceedsproceeds from the issuance and sale of new debt (excluding expected aircraft financing), government grants associated with the Payroll Support Program of the CARES Act, issuance of new UAL common stock, net proceeds from sale of short-term and other investments and changes in restricted cash balances are not included in this figure. The Company's management views daily "cash burn" as an important measure in monitoring liquidity in order to assess the Company's cash needs without the impact of certain extraordinary actions or events, and the Company believes this provides useful information to investors about the Company's liquidity position.stock.
On March 27, 2020, the President of the United States signed the CARES Act into law. The CARES Act is intended to respondIn addition to the COVID-19 pandemic and its impact onforegoing transactions, United entered into the economy, public health, state and local governments, individuals, and businesses. The CARES Act also provides supplemental appropriations for federal agencies to respond to the COVID-19 pandemic.following agreements with Treasury:
PSP2.
On April 20, 2020,January 15, 2021, United entered into a Payroll Support Program Extension Agreement (the "PSP"PSP2 Agreement") with the U.S. Treasury Department providing the Company with total funding of approximately $5.0$3.0 billion, pursuant to the Payroll Support Program established under Subtitle A of Title IV of Division N of the CARES Act.Consolidated Appropriations Act, 2021. These funds will bewere used to pay for the wages, salaries and benefits of United employees, including the payment of lost wages, salaries and benefits to returning employees. Approximately $3.5
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$2.1 billion of the $5.0 billion will bewas provided as a direct grant and approximately $1.5 billion will be in the form of$870 million as indebtedness evidenced by a 10-year senior unsecured promissory note (the "PSP"PSP2 Note"). As of June 30, 2020, the Company has received approximately $4.5 billion of the expected $5.0 billion through the Payroll Support Program under the CARES Act. The approximately $500 million remaining balance is expected to be received by the end of July 2020. As of June 30, 2020, the Company recorded $1.6 billion in grant income as Special Charges (credit) and recorded $1.5 billion as Payroll Support Program deferred credit. The Company also recorded $57 million in warrants issued to the U.S. Treasury Department, within stockholder's equity, in connection with the PSP Note. See Note 32 to the financial statements included in Part I, Item 1 of this report for additional information related to these warrants.
Inon the warrants issued in connection with entering into the PSP Agreement, during the second quarter, UAL issued the PSPPSP2 Note to the U.S. Treasury Department evidencing senior unsecured indebtednessand Note 8 of UAL of approximately $1.3 billion. The principal amountthis report for a discussion of the PSP Note will increase in an amount equal to 30%PSP2 Note. As a result of any disbursement made by the U.S. Treasury Department to United under the PSP Agreement after June 30, 2020. The PSP Note is guaranteed by United and will mature ten years after the initial issuance on April 20, 2030. If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness of UAL with a principal balance in excess of a specified amount, or if certain subsidiaries are formed or acquired, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP Note. UAL may, at its option, prepay the PSP Note, at any time, and from time to time, at par. UAL is required to prepay the PSP Note upon the occurrence of certain change of control triggering events. The PSP Note does not require any amortization and is to be repaid in full on the maturity date.
Under the PSPPSP2 Agreement, the Company offered an opportunity to return to active employment to U.S. employees who were impacted by involuntary furloughs.
PSP3. On April 29, 2021, in connection with the Payroll Support Program established under Section 7301 of the American Rescue Plan Act of 2021, United entered into a Payroll Support Program 3 Agreement (the "PSP3 Agreement") with Treasury providing the Company with total funding of approximately $2.8 billion. Approximately $2.0 billion was provided as a direct grant and $810 million as indebtedness evidenced by a 10-year senior unsecured promissory note (the "PSP3 Note"). These funds will be used by United exclusively for the continuation of payment of its business are subjectemployee wages, salaries and benefits. See Note 2 to certain restrictions, including, but not limited to, restrictionsthe financial statements included in Part I, Item 1 of this report for additional information on the paymentwarrants issued in connection with the PSP3 Note and Note 8 of dividendsthis report for a discussion of the PSP3 Note.
United Next. On June 27, 2021, United entered into a supplemental agreement to that certain Purchase Agreement, dated May 15, 2018 with The Boeing Company ("Boeing") for a firm narrowbody aircraft order of 200 Boeing 737 MAX aircraft. The order consists of 150 Boeing 737 MAX 10s and 50 Boeing 737 MAX 8s. Also on June 27, 2021, United entered into an amendment to that certain Purchase Agreement, dated December 3, 2019 with Airbus S.A.S. ("Airbus") for a firm narrowbody aircraft order of 70 Airbus A321neo aircraft. The firm orders of 200 Boeing 737 MAX aircraft and 70 Airbus A321neo aircraft are expected to be delivered starting in 2023 through 2028 and 2026, respectively.
The "United Next" plan will have a transformational effect on the customer experience and is expected to increase the total number of available seats per domestic departure by almost 30% by 2026 and significantly lower carbon emissions per seat.
The new aircraft order will come with a new signature interior that includes seat-back entertainment in every seat, larger overhead bins for every passenger's carry-on bag and the ability to repurchase UAL's equity securities, requirements to maintain certain levels of scheduled service, requirements to maintain U.S. employment levels through September 30, 2020industry's fastest available in-flight WiFi, as well as a bright look-and-feel with LED lighting. Adding these new 737 MAX and certain limitations on executive compensation.
On April 17, 2020,Airbus A321neo aircraft means the Company submittedwill replace older, smaller mainline jets and at least 200 single-class regional jets with larger aircraft, which we expect will lead to significant sustainability benefits compared to older planes: an applicationexpected 11% overall improvement in fuel efficiency and an expected 17-20% lower carbon emission per seat compared to the Loan Program under the CARES Act. Under the Loan Program, the Company expects to have the ability, through March 26, 2021, to borrow up to approximately $4.5 billion from the U.S. Treasury Department for a term of up to five years. The Company continues to work with the U.S. Treasury Department on the CARES Act Loan Program loan, and it is the Company's expectation that, if the Company takes the loan, it will use available slots, gates and routes collateral. The Company believes it has sufficient slots, gates and routes collateral available to meet the collateral coverage that may be required for the full $4.5 billion available to the Company under the Loan Program.older planes.
In connection with any borrowings under the Loan Program, the Company and its business will be subject to certain restrictions, including, but not limited to, certain of the restrictions described above with respect to the PSP Agreement.
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RESULTS OF OPERATIONS
The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three months ended June 30, 20202021 as compared to the corresponding period in 2019.2020.
Second Quarter 20202021 Compared to Second Quarter 20192020
The Company recorded a net loss of $434 million in the second quarter of 2021 as compared to a net loss of $1.6 billion in the second quarter of 2020 as compared to net income of $1.1 billion in the second quarter of 2019.2020. The Company considers a key measure of its performance to be operating income (loss), which was a $270 million loss for the second quarter of 2021, as compared to a $1.6 billion loss for the second quarter of 2020, as compared to income of $1.5 billion for the second quarter of 2019, a $3.1$1.4 billion decrease year-over-year, primarily as a result of the global COVID-19 pandemic.improvements in demand for air travel. Significant components of the
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Company's operating results for the three months ended June 30 are as follows (in millions, except percentage changes):
  2020 2019 Increase (Decrease) % Change
Operating revenue $1,475
 $11,402
 $(9,927) (87.1)
Operating expense 3,112
 9,930
 (6,818) (68.7)
Operating income (loss) (1,637) 1,472
 (3,109) NM
Nonoperating income (expense) (366) (118) 248
 210.2
Income tax expense (benefit) (376) 302
 (678) NM
Net income (loss) $(1,627) $1,052
 $(2,679) NM
20212020Increase (Decrease)% Change
Operating revenue$5,471 $1,475 $3,996 270.9 
Operating expense5,741 3,112 2,629 84.5 
Operating loss(270)(1,637)(1,367)(83.5)
Nonoperating expense, net(294)(366)(72)(19.7)
Income tax benefit(130)(376)(246)(65.4)
Net loss$(434)$(1,627)$(1,193)(73.3)
Certain consolidated statistical information for the Company's operations for the three months ended June 30 is as follows:
2020 2019 Increase (Decrease) % Change20212020Increase (Decrease)% Change
Passengers (thousands) (a)2,813
 42,592
 (39,779) (93.4)Passengers (thousands) (a)23,909 2,813 21,096 749.9 
Revenue passenger miles ("RPMs" or "traffic") (millions) (b)2,970
 63,001
 (60,031) (95.3)Revenue passenger miles ("RPMs" or "traffic") (millions) (b)28,514 2,970 25,544 860.1 
Available seat miles ("ASMs" or "capacity") (millions) (c)8,963
 73,240
 (64,277) (87.8)Available seat miles ("ASMs" or "capacity") (millions) (c)39,613 8,963 30,650 342.0 
Passenger load factor (d)33.1% 86.0% (52.9) pts.
 N/A
Passenger load factor (d)72.0 %33.1 %38.9 pts.N/A
Passenger revenue per available seat mile ("PRASM") (cents)7.60
 14.32
 (6.72) (46.9)Passenger revenue per available seat mile ("PRASM") (cents)11.02 7.60 3.42 45.0 
Average yield per revenue passenger mile ("Yield") (cents) (e)22.93
 16.64
 6.29
 37.8
Average yield per revenue passenger mile ("Yield") (cents) (e)15.31 22.93 (7.62)(33.2)
Cargo ton miles ("CTM") (millions) (f)496
 831
 (335) (40.3)
Cargo revenue ton miles ("CTM") (millions) (f)Cargo revenue ton miles ("CTM") (millions) (f)892 496 396 79.8 
Cost per available seat mile ("CASM") (cents)34.72
 13.56
 21.16
 156.0
Cost per available seat mile ("CASM") (cents)14.49 34.72 (20.23)(58.3)
Average price per gallon of fuel, including fuel taxes$1.18
 $2.16
 $(0.98) (45.4)Average price per gallon of fuel, including fuel taxes$1.97 $1.18 $0.79 66.9 
Fuel gallons consumed (millions)204
 1,102
 (898) (81.5)Fuel gallons consumed (millions)625 204 421 206.4 
Employee headcount, as of June 3091,800
 94,600
 (2,800) (3.0)Employee headcount, as of June 3084,400 91,800 (7,400)(8.1)
(a) The number of revenue passengers measured by each flight segment flown.       (a) The number of revenue passengers measured by each flight segment flown.
(b) The number of scheduled miles flown by revenue passengers.(b) The number of scheduled miles flown by revenue passengers.(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.(c) The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown.(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.(d) Revenue passenger miles divided by available seat miles.(d) Revenue passenger miles divided by available seat miles.
(e) The average passenger revenue received for each revenue passenger mile flown.(e) The average passenger revenue received for each revenue passenger mile flown.(e) The average passenger revenue received for each revenue passenger mile flown.
(f) The number of cargo revenue tons transported multiplied by the number of miles flown.(f) The number of cargo revenue tons transported multiplied by the number of miles flown.(f) The number of cargo revenue tons transported multiplied by the number of miles flown.
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):
2020 2019 Increase (Decrease) % Change20212020Increase (Decrease)% Change
Passenger revenue$681
 $10,486
 $(9,805) (93.5)Passenger revenue$4,366 $681 $3,685 541.1 
Cargo402
 295
 107
 36.3
Cargo606 402 204 50.7 
Other operating revenue392
 621
 (229) (36.9)Other operating revenue499 392 107 27.3 
Total operating revenue$1,475
 $11,402
 $(9,927) (87.1)Total operating revenue$5,471 $1,475 $3,996 270.9 
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The table below presents selected second quarter passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes:
Increase (decrease) from 2020:
Increase (decrease) from 2019: DomesticAtlanticPacificLatinTotal
Domestic Atlantic Pacific Latin Total
Passenger revenue (in millions)Passenger revenue (in millions)$2,746 $266 $98 $575 $3,685 
Passenger revenuePassenger revenue506.6 %466.7 %288.2 %1,197.9 %541.1 %
Average fare per passenger11.8 % 7.0 % 38.4 % 58.3 % (1.7)%Average fare per passenger(22.5)%(22.0)%(8.8)%(49.7)%(24.6)%
YieldYield(32.7)%(35.2)%13.8 %(44.8)%(33.2)%
PRASMPRASM57.0 %14.4 %42.7 %(10.1)%45.0 %
Passengers(92.6)% (97.2)% (97.8)% (96.5)% (93.4)%Passengers682.3 %626.7 %325.7 %2,481.7 %749.9 %
RPMs (traffic)(93.7)% (97.3)% (98.1)% (96.7)% (95.3)%RPMs (traffic)801.8 %775.2 %241.3 %2,250.5 %860.1 %
ASMs (capacity)(84.6)% (91.3)% (91.7)% (93.6)% (87.8)%ASMs (capacity)286.1 %396.3 %172.1 %1,343.1 %342.0 %
Passenger load factor (points)(51.8) (57.9) (63.4) (42.4) (52.9)Passenger load factor (points)47.6 20.2 4.9 27.3 38.9 
Passenger revenue decreased $9.8increased $3.7 billion, or 93.5%541.1%, in the second quarter of 20202021 as compared to the year-ago period, primarily due to the decreaseimprovements in demand for air travel as a result ofCOVID-19 vaccinations are increasingly available in the worldwide spread of COVID-19United States and the associated shelter-in-place directivescertain other jurisdictions and as more governments are lifting travel and quarantine restrictions.
Cargo revenue increased $107$204 million, or 36.3%50.7%, in the second quarter of 20202021 as compared to the year-ago period, primarily due to an increase in cargo-only charter flights as a result of increased demand for critical goods during the COVID-19 pandemic.pandemic and continued capacity growth across markets.
Other operating revenue decreased $229increased $107 million, or 36.9%27.3%, in the second quarter of 20202021 as compared to the year-ago period, primarily due to a declinean increase in mileage revenue from non-airline partners, including the co-branded credit card partner, JPMorgan Chase Bank, N.A.
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):
2020 2019 Increase (Decrease) % Change20212020Increase (Decrease)% Change
Salaries and related costs$2,170
 $3,057
 $(887) (29.0)Salaries and related costs$2,276 $2,170 $106 4.9 
Aircraft fuel240
 2,385
 (2,145) (89.9)Aircraft fuel1,232 240 992 413.3 
Depreciation and amortizationDepreciation and amortization620 618 2 0.3 
Landing fees and other rentLanding fees and other rent564 429 135 31.5 
Regional capacity purchase388
 715
 (327) (45.7)Regional capacity purchase547 388 159 41.0 
Landing fees and other rent429
 660
 (231) (35.0)
Depreciation and amortization618
 560
 58
 10.4
Aircraft maintenance materials and outside repairs110
 421
 (311) (73.9)Aircraft maintenance materials and outside repairs302 110 192 174.5 
Distribution expenses31
 442
 (411) (93.0)Distribution expenses139 31 108 348.4 
Aircraft rent47
 73
 (26) (35.6)Aircraft rent52 47 5 10.6 
Special charges (credit)(1,449) 71
 (1,520) NM
Special charges (credits)Special charges (credits)(948)(1,449)(501)NM
Other operating expenses528
 1,546
 (1,018) (65.8)Other operating expenses957 528 429 81.3 
Total operating expenses$3,112
 $9,930
 $(6,818) (68.7)Total operating expenses$5,741 $3,112 $2,629 84.5 
Salaries and related costs decreased $887increased $106 million, or 29.0%4.9%, in the second quarter of 20202021 as compared to the year-ago period, despite the 8.1% decrease in headcount, primarily due to several factors including an increase in front-line employees' salaries from higher flight capacity, prior year schedule reductions for management and administrative employees, Company-offeredprior year Company offered leaves of absence by front-line employees and other voluntary separation programs, $215 million lower profit sharing and other employee incentives due to the impact of COVID-19 on the second quarter of 2020 results and $142$34 million in lower tax credits provided by the Employee Retention Credit under the CARES Act related to the second quarter of 2020.Act.
Aircraft fuel expense decreasedincreased by $2.1 billion,$992 million, or 89.9%413.3%, in the second quarter of 20202021 as compared to the year-ago period.period, due to both higher average price per gallon and increased consumption. The table below presents the significant changes in
32
aircraft fuel cost per gallon in the three months ended June 30, 20202021 as compared to the year-ago period:
(In millions)Average price per gallon
20212020% Change20212020% Change
Fuel expense$1,232 $240 413.3 %$1.97 $1.18 66.9 %
Fuel consumption (gallons)625 204 206.4 %
 (In millions)   Average price per gallon
 2020 2019 % Change 2020 2019 % Change
Fuel expense$240
 $2,385
 (89.9) $1.18
 $2.16
 (45.4)
Total fuel consumption (gallons)204
 1,102
 (81.5)      
Regional capacity purchase decreased $327Landing fees and other rent increased $135 million, or 45.7%31.5%, in the second quarter of 20202021 as compared to the year-ago period, primarily due to significantly reduced regional flying as a result of COVID-19.an increase in capacity-based rent and landing fees.
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Landing fees and other rent decreased $231Regional capacity purchase increased $159 million, or 35.0%41.0%, in the second quarter of 20202021 as compared to the year-ago period, primarily due to a decrease in capacity-based rentincreased regional flying and landing fees.increased pass-through maintenance costs.
DepreciationAircraft maintenance materials and amortizationoutside repairs increased $58$192 million, or 10.4%174.5%, in the second quarter of 20202021 as compared to the year-ago period, primarily due to additionshigher volumes of aircraftflying and upgrades to aircraft interiors.the timing of airframe maintenance events.
Aircraft maintenance materials and outside repairs decreased $311Distribution expenses increased $108 million, or 73.9%348.4%, in the second quarter of 20202021 as compared to the year-ago period, primarily due to a reduction in airframe checks, engine overhauls, expenses associated with power-by-the-hour engine maintenance contractshigher credit card fees, commissions and line maintenance due to reduced flying.
Distribution expenses decreased $411 million, or 93.0%, in the second quarterhigher volume of 2020 as compared to the year-ago period primarily due to lower commission and credit cardglobal distribution fees as a result of the overall decreaseincrease in passenger revenue due to the COVID-19 pandemic.
Aircraft rent decreased $26 million, or 35.6%, in the second quarter of 2020 as compared to the year-ago period primarily due to the purchase of leased aircraft.revenue.
Details of the Company's special charges (credit)(credits) include the following for the three months ended June 30 (in millions):
2021 2020
CARES Act grant$(1,079)$(1,589)
Impairment of assets59 80 
Severance and benefit costs11 63 
(Gains) losses on sale of assets and other special charges61 (3)
Special charges (credits)$(948)$(1,449)
 2020 2019
CARES Act grant$(1,589) $—
Impairment of assets80
 61
Severance and benefit costs63
 6
(Gains) losses on sale of assets and other special charges(3) 4
Special charges (credit)$(1,449) $71
See Note 119 to the financial statements included in Part I, Item 1 of this report for additional information.informationon the Company's special charges (credits).
Other operating expenses decreased $1.0 billion,increased $429 million, or 65.8%81.3%, in the second quarter of 20202021 as compared to the year-agoyear ago period, primarily due to the impacts of COVID-19 onimproved flight activities which resulted in an increase in our catering, airport operations (including United Club closures and capacity-driven expenses like food catering, cargo trucking andground handling, interrupted trip charges and navigation fees, among others), technology needs (including Wi-Fi expenses),projects and crew-related expenses and $88 million received in settlement of credit card interchange fees.expenses.
Nonoperating Income (Expense). The table below shows year-over-year comparisons of the Company's nonoperating income (expense) for the three months ended June 30 (in millions, except for percentage changes):
20212020Increase (Decrease)% Change
Interest expense$(426)$(196)$230 117.3 
Interest capitalized22 17 5 29.4 
Interest income12 11 1 9.1 
Unrealized gains on investments, net147 9 138 NM
Miscellaneous, net(49)(207)(158)(76.3)
Total$(294)$(366)$(72)(19.7)
 2020 2019 Increase (Decrease) % Change
Interest expense$(196) $(191) $5
 2.6
Interest capitalized17
 21
 (4) (19.0)
Interest income11
 38
 (27) (71.1)
Unrealized gains on investments, net9
 34
 (25) NM
Miscellaneous, net(207) (20) 187
 NM
Total$(366) $(118) $248
 210.2
Unrealized gains on investments, net, decreased $25Interest expense increased $230 million, or 117.3%, in the second quarter of 20202021 as compared to the year-ago period, primarily due to a decreasethe issuance of new debt to provide additional liquidity to the Company during the COVID-19 pandemic.
Unrealized gains on investments, net, was $147 million in the second quarter of 2021 as compared to $9 million in the year-ago period, primarily due to the change in the market value of the Company's equity investment in Azul.Azul Linhas Aéreas Brasileiras S.A. ("Azul") and Clear Secure, Inc. (formerly Alclear, Inc.) ("Clear"). See Note 6 to the financial statements included in Part I, Item 1 of this report for information related to these equity investments.
Miscellaneous, net decreased $158 million in the second quarter of 2021 as compared to the year-ago period, primarily due to $231 million of special termination benefits and settlement losses related to voluntary separation programs under the Company's postretirement medical programs and defined benefit plans recorded in the second quarter of 2020. See Notes 85, 6, 7 and 119 to the financial statements included in Part I, Item 1 of this report for additional information.
Miscellaneous, net increased $187 million in the second quarter of 2020 as compared to the year-ago period primarily due to settlement losses and special termination benefits related to voluntary separation programs under the Company's non-pilot U.S. defined benefit pension plan and postretirement medical programs. See Notes 6 and 11 to the financial statements included in Part I, Item 1 of this report for additional information.
33
Income Taxes. See Note 54 to the financial statements included in Part I, Item 1 of this report for information related to income taxes.
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First Six Months 20202021 Compared to First Six Months 20192020
The Company recorded a net loss of $1.8 billion in the first six months of 2021 as compared to a net loss of $3.3 billion in the first six months of 2020 as compared to net income of $1.3 billion in the first six months of 2019.2020. The Company considers a key measure of its performance to be operating income (loss), which was a $1.7 billion loss for the first six months of 2021, as compared to a $2.6 billion loss for the first six months of 2020, as compared to income of $2.0 billion for the first six months of 2019, a $4.6 billion$958 million decrease year-over-year. Significant components of the Company's operating results for the six months ended June 30 are as follows (in millions, except percentage changes):
  2020 2019 Increase (Decrease) % Change
Operating revenue $9,454
 $20,991
 $(11,537) (55.0)
Operating expense 12,063
 19,024
 (6,961) (36.6)
Operating income (loss) (2,609) 1,967
 (4,576) NM
Nonoperating income (expense) (1,508) (246) 1,262
 NM
Income tax expense (benefit) (786) 377
 (1,163) NM
Net income (loss) $(3,331) $1,344
 $(4,675) NM
20212020Increase (Decrease)% Change
Operating revenue$8,692 $9,454 $(762)(8.1)
Operating expense10,343 12,063 (1,720)(14.3)
Operating loss(1,651)(2,609)(958)(36.7)
Nonoperating expense, net(664)(1,508)(844)(56.0)
Income tax benefit(524)(786)(262)(33.3)
Net loss$(1,791)$(3,331)$(1,540)(46.2)
Certain consolidated statistical information for the Company's operations for the six months ended June 30 is as follows:
2020 2019 Increase (Decrease) % Change20212020Increase (Decrease)% Change
Passengers (thousands)33,172
 79,046
 (45,874) (58.0)Passengers (thousands)38,583 33,172 5,411 16.3 
RPMs (millions)46,199
 116,098
 (69,899) (60.2)RPMs (millions)45,762 46,199 (437)(0.9)
ASMs (millions)69,901
 138,885
 (68,984) (49.7)ASMs (millions)69,983 69,901 82 0.1 
Passenger load factor66.1% 83.6% (17.5) pts.
 N/A
Passenger load factor65.4 %66.1 %(0.7) pts.N/A
PRASM (cents)11.08
 13.83
 (2.75) (19.9)PRASM (cents)9.55 11.08 (1.53)(13.8)
Yield (cents)16.77
 16.55
 0.22
 1.3
Yield (cents)14.60 16.77 (2.17)(12.9)
CTM (millions)1,191
 1,636
 (445) (27.2)CTM (millions)1,657 1,191 466 39.1 
CASM (cents)17.26
 13.70
 3.56
 26.0
CASM (cents)14.78 17.26 (2.48)(14.4)
Average price per gallon of fuel, including fuel taxes$1.76
 $2.11
 $(0.35) (16.6)Average price per gallon of fuel, including fuel taxes$1.87 $1.76 $0.11 6.3 
Fuel gallons consumed (millions)1,114
 2,087
 (973) (46.6)Fuel gallons consumed (millions)1,115 1,114 1 0.1 
Employee headcount, as of June 3091,800
 94,600
 (2,800) (3.0)Employee headcount, as of June 3084,400 91,800 (7,400)(8.1)
Operating Revenue. The table below shows year-over-year comparisons by type of operating revenue for the six months ended June 30 (in millions, except for percentage changes):
20212020Increase (Decrease)% Change
Passenger revenue$6,682 $7,746 $(1,064)(13.7)
Cargo1,103 666 437 65.6 
Other operating revenue907 1,042 (135)(13.0)
Total operating revenue$8,692 $9,454 $(762)(8.1)
34
 2020 2019 Increase (Decrease) % Change
Passenger revenue$7,746
 $19,211
 $(11,465) (59.7)
Cargo666
 581
 85
 14.6
Other operating revenue1,042
 1,199
 (157) (13.1)
Total operating revenue$9,454
 $20,991
 $(11,537) (55.0)
The table below presents selected passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes for the six months ended June 30, 20202021 compared to the six months ended June 30, 2019:2020:
 Increase (decrease) from 2019:
 Domestic Atlantic Pacific Latin Total
Average fare per passenger(0.4)% (0.9)% (5.6)% 5.3 % (3.9)%
Passengers(57.5)% (65.0)% (66.1)% (54.8)% (58.0)%
RPMs (traffic)(58.3)% (62.9)% (67.8)% (55.2)% (60.2)%
ASMs (capacity)(45.9)% (53.6)% (59.9)% (48.2)% (49.7)%
Passenger load factor (points)(19.6) (16.1) (16.0) (11.5) (17.5)
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Increase (decrease) from 2020:
 DomesticAtlanticPacificLatinConsolidated
Passenger revenue (in millions)$(46)$(601)$(501)$84 $(1,064)
Passenger revenue(0.9)%(53.2)%(69.4)%9.9 %(13.7)%
Average fare per passenger(17.3)%(18.0)%38.9 %(26.1)%(25.8)%
Yield(16.2)%(29.1)%78.7 %(15.8)%(12.9)%
PRASM(3.8)%(48.3)%(40.2)%(29.7)%(13.8)%
Passengers19.8 %(42.9)%(78.0)%48.8 %16.3 %
RPMs (traffic)18.3 %(33.9)%(82.9)%30.5 %(0.9)%
ASMs (capacity)3.0 %(9.5)%(48.8)%56.4 %0.1 %
Passenger load factor (points)9.8 (17.3)(43.3)(12.1)(0.7)
Passenger revenue decreased $11.5 billion, or 59.7%, in the first six months of 20202021 decreased $1.1 billion, or 13.7%, as compared to the year-ago period, primarily due to the decrease in demand for air travel as a resultimpacts of the worldwide spread of COVID-19 and travel restrictions that started in the associated shelter-in-place directives and travel restrictions.latter part of the first quarter of 2020.
Cargo revenue increased $85$437 million, or 14.6%65.6%, in the first six months of 20202021 as compared to the year-ago period, primarily due to the implementation and continued expansion ofan increase in cargo-only charter flights as a result of increased demand for critical goods during the COVID-19 pandemic. With long haul passenger demand now increasing we will cease most cargo-only flights for the remainder of 2021 although we continue to project strong cargo yields for the remainder of the year.
Other operating revenue decreased $157$135 million, or 13.1%13.0%, in the first six months of 20202021 as compared to the year-ago period, primarily due to lower passenger volumes, lower United Club lounge usage, and a decline in mileage revenue from non-airline partners, including the co-branded credit card partner, JPMorgan Chase Bank, N.A.
Operating Expenses. The table below includes data related to the Company's operating expenses for the six months ended June 30 (in millions, except for percentage changes):
2020 2019 Increase (Decrease) % Change20212020Increase (Decrease)% Change
Salaries and related costs$5,125
 $5,930
 $(805) (13.6)Salaries and related costs$4,500 $5,125 $(625)(12.2)
Aircraft fuel1,966
 4,408
 (2,442) (55.4)Aircraft fuel2,083 1,966 117 6.0 
Depreciation and amortizationDepreciation and amortization1,243 1,233 10 0.8 
Landing fees and other rentLanding fees and other rent1,083 1,052 31 2.9 
Regional capacity purchase1,125
 1,403
 (278) (19.8)Regional capacity purchase1,026 1,125 (99)(8.8)
Landing fees and other rent1,052
 1,248
 (196) (15.7)
Depreciation and amortization1,233
 1,107
 126
 11.4
Aircraft maintenance materials and outside repairs544
 829
 (285) (34.4)Aircraft maintenance materials and outside repairs571 544 27 5.0 
Distribution expenses326
 802
 (476) (59.4)Distribution expenses224 326 (102)(31.3)
Aircraft rent97
 154
 (57) (37.0)Aircraft rent107 97 10 10.3 
Special charges (credit)(1,386) 89
 (1,475) NM
Special charges (credits)Special charges (credits)(2,325)(1,386)939 NM
Other operating expenses1,981
 3,054
 (1,073) (35.1)Other operating expenses1,831 1,981 (150)(7.6)
Total operating expenses$12,063
 $19,024
 $(6,961) (36.6)Total operating expenses$10,343 $12,063 $(1,720)(14.3)
Salaries and related costs decreased $805$625 million, or 13.6%12.2%, in the first six months of 20202021 as compared to the year-ago period, primarily due to schedule reductionslower headcount as a result of management and administrative employees, Company-offered leaves of absence, othervarious employee voluntary separation programs $237since the start of the COVID-19 pandemic and a $206 million lower profit sharing and employee incentives due to the impact of COVID-19 on 2020 results and $142 millionincrease in tax credits provided by the Employee Retention Credit under the CARES Act related to the second quarter of 2020.Act.
Aircraft fuel expense decreased $2.4 billion,increased $117 million, or 55.4%6.0%, in the first six months of 20202021 as compared to the year-ago period.period, primarily due to the higher average price per gallon of fuel. The table below presents the significant changes in aircraft fuel cost
35
per gallon in the six months ended June 30, 20202021 as compared to the year-ago period:
(In millions)   Average price per gallon(In millions)Average price per gallon
2020 2019 % Change 2020 2019 % Change20212020%
Change		20212020%
Change
Fuel expense$1,966
 $4,408
 (55.4) $1.76
 $2.11
 (16.6)Fuel expense$2,083 $1,966 6.0 %$1.87 $1.76 6.3 %
Total fuel consumption (gallons)1,114
 2,087
 (46.6)      
Fuel consumption (gallons)Fuel consumption (gallons)1,115 1,114 0.1 %
Regional capacity purchase decreased $278$99 million, or 19.8%8.8%, in the first six months of 20202021 as compared to the year-ago period, primarily due to reduced regional flying in the first half of 2021 as a result of COVID-19.COVID-19 compared to the first half of 2020 which did not experience significantly reduced flying until March of that time period.
Landing fees and other rentDistribution expenses decreased $196$102 million, or 15.7%31.3%, in the first six months of 2020 as compared to the year-ago period primarily due to a decrease in capacity-based rent and landing fees.
Depreciation and amortization increased $126 million, or 11.4%, in the first six months of 2020 as compared to the year-ago period primarily due to additions of aircraft and upgrades to aircraft interiors.
Aircraft maintenance materials and outside repairs decreased $285 million, or 34.4%, in the first six months of 2020 as compared to the year-ago period primarily due to a reduction in airframe checks, engine overhauls, expenses associated with power-by-the-hour engine maintenance contracts and line maintenance due to reduced flying.
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Distribution expenses decreased $476 million, or 59.4%, in the first six months of 20202021 as compared to the year-ago period, primarily due to lower commissioncredit card fees, commissions and credit cardlower volume of global distribution fees as a result of the overall decrease in passenger revenue due to the COVID-19 pandemic.
Aircraft rent decreased $57 million, or 37.0%, in the first six months of 2020 as compared to the year-ago period primarily due to the purchase of leased aircraft.
Details of the Company's special charges (credit)(credits) include the following for the six months ended June 30 (in millions):
2021 2020
CARES Act grant$(2,889)$(1,589)
Impairment of assets59 130 
Severance and benefit costs428 63 
(Gains) losses on sale of assets and other special charges77 10 
Special charges (credits)$(2,325)$(1,386)
 2020 2019
CARES Act grant$(1,589) $—
Impairment of assets130
 69
Severance and benefit costs63
 12
(Gains) losses on sale of assets and other special charges10
 8
Special charges (credit)$(1,386) $89
See Note 119 to the financial statements included in Part I, Item 1 of this report for additional information.informationon the Company's special charges (credits).
Other operating expenses decreased $1.1 billion,$150 million, or 35.1%7.6%, in the first six months of 20202021 as compared to the year-ago period, primarily due to the impacts of COVID-19 on our airport operations (including United Club closurescatering and capacity-driven expenses like food catering, cargo trucking and handling, interrupted trip charges and navigation fees, among others), technology needs (including Wi-Fi expenses), crew-related expenses, as well as lower advertising and $88 million received in settlement of credit card interchange fees.other discretionary spend.
Nonoperating Income (Expense). The following table illustrates the year-over-year dollar and percentage changes in the Company's nonoperating income (expense) for the six months ended June 30 (in millions, except for percentage changes):
20212020Increase (Decrease)% Change
Interest expense$(779)$(367)$412 112.3 
Interest capitalized39 38 1 2.6 
Interest income19 37 (18)(48.6)
Unrealized gains (losses) on investments, net125 (310)435 NM
Miscellaneous, net(68)(906)(838)(92.5)
Total$(664)$(1,508)$(844)(56.0)
 2020 2019 Increase (Decrease) % Change
Interest expense$(367) $(379) $(12) (3.2)
Interest capitalized38
 43
 (5) (11.6)
Interest income37
 67
 (30) (44.8)
Unrealized gains (losses) on investments, net(310) 51
 (361) NM
Miscellaneous, net(906) (28) 878
 NM
Total$(1,508) $(246) $1,262
 NM
Unrealized gains (losses) on investments, net, decreased by $361Interest expense increased $412 million, due to a $310 million lossor 112.3%, in the first six months of 20202021 as compared to a $51the year-ago period, primarily due to the issuance of new debt to provide additional liquidity to the Company during the COVID-19 pandemic.
Unrealized gains on investments, net, was $125 million gainin the first six months of 2021 as compared to $310 million in unrealized losses in the year-ago period, as a result of a decreaseprimarily due to the change in the market value of the Company's equity investment in Azul and a decrease in the fair value of the Avianca Holdings S.A. ("AVH") share call options, AVH share appreciation rights and AVH share-based upside sharing agreement.Azul. See Notes 8 and 11Note 6 to the financial statements included in Part I, Item 1 of this report for additional information.information related to this equity investment.
Miscellaneous, net increased $878decreased $838 million in the first six months of 20202021 as compared to the year-ago period, primarily due to the $697 million of credit loss allowances associated with the Company's Term Loan Agreement, with, among others, BRW Aviation Holding LLC and BRW Aviation LLC, and the related guarantee recorded in the first quarter of 2020, and settlement losses andlower special termination benefits related to voluntary separation programs under the Company's non-pilot U.S. defined benefit pension plan and postretirement medical programs. See Notes 5, 6, 7 9 and 119 to the financial statements included in Part I, Item 1 of this report for additional information.
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Income Taxes. See Note 54 to the financial statements included in Part I, Item 1 of this report for information related to income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Current Liquidity
As of June 30, 2020,2021, the Company had $7.5$21.1 billion in unrestricted cash, cash equivalents and short-term investments, as compared to $4.9$11.7 billion at December 31, 2019.2020. As of June 30, 2020,2021, the Company also had its entire commitment capacity of $2.0 billion under the revolving credit facility of the Revolving Credit Agreement available for borrowings. To maximize United's flexibility under a debt incurrence covenant contained in two of United's financings, on July 2, 2020, United took the proactive
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step of borrowing $1.0 billion under the Revolving Credit Agreement, which leaves $1.0$1.75 billion available for borrowing under such agreement by Unitedthe New Revolving Credit Facility at any time until April 1, 2022. At June 30, 2020, the Company also had $107 million of restricted cash and cash equivalents, which primarily consisted of collateral for letters of credit and collateral associated with facility leases and other insurance-related obligations.
The Company began experiencing a significant decline in international and domestic demand related to COVID-19 during the first quarter of 2020. In response to decreased demand, the Company cut, relative to 2019 capacity, approximately 88% of its scheduled capacity for the second quarter of 2020. The Company expects scheduled capacity to be down approximately 65% year-over-year in the third quarter of 2020. The Company also expects its scheduled capacity in the fourth quarter of 2020 to be generally consistent with the third quarter of 2020. The Company plans to continue to proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand. The Company expects demand to remain suppressed until a widely accepted treatment and/or vaccine for COVID-19 is available. In addition, the Company does not currently expect the recovery from COVID-19 to follow a linear path.21, 2025.
The Company has taken a number of actions in response to the decreasedsignificant decline in international and domestic demand for air travel. In additiontravel related to the schedule reductionsCOVID-19 pandemic, as discussed above, the Company has:
reduced its planned capital expenditures and reduced operating expenditures for the remainder of 2020 and 2021 (including by postponing projects deemed non-critical to the Company's operations);
terminated its share repurchase program;
as of July 2, 2020, issued or entered into approximately $10.0 billion ($3.0 billion through June 30, 2020) in secured notes, secured term loan facilities and new aircraft financings, including the MileagePlus Financing;
raised approximately $1.1 billion in cash proceeds in an underwritten public offering of UAL common stock;
entered into an equity distribution agreement relating to the issuance and sale, from time to time, of up to 28 million shares of UAL common stock;
borrowed, on July 2, 2020, $1.0 billion under the $2.0 billion revolving credit facility"Impact of the Revolving Credit Agreement;COVID-19 Pandemic and Outlook" above. The Company continues to focus on reducing expenses and managing its liquidity but has also begun preparing for an eventual recovery from the COVID-19 pandemic. Since March 2021, we have seen increasing demand for travel both domestically and in countries where entry is permitted, and we are taking steps, which include making certain investments in the recovery, to be prepared if demand for travel continues to increase in line with recent customer booking trends. However, the timing of demand recovery will be dependent on a number of factors outside of our control, and we expect to continue to modify our cost management structure and capacity as the timing of demand recovery becomes more certain.
entered into an agreement to finance certain aircraft currently subject to purchase agreements through a sale and leaseback transaction;
elected to defer the payment of $78 million in payroll taxes incurred through June 30, 2020, as provided by the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), untilOn January 15, 2021, and 2022;
temporarily grounded certain of its mainline fleet; and
•
taken a number of actions to reduce employee-related costs, including, among other items, the Company's Chief Executive Officer and President waived 100% of their respective base salaries through 2020, other officers temporarily waived a portion of their base salaries, the Company's non-employee directors waived 100% of their cash compensation for the second and third quarters of 2020, the Company suspended merit salary increases and implemented a temporary four-day work week for management and administrative employees and the Company offered voluntary unpaid leaves of absence.
On April 20, 2020, United entered into the PSPPSP2 Agreement with the U.S. Treasury, Department, providing the Company with total funding of approximately $5.0$3.0 billion, pursuantconsisting of approximately $2.1 billion as a direct grant and $870 million as indebtedness evidenced by the PSP2 Note. See Note 8 to the Payroll Support Program underfinancial statements included in Part I, Item 1 of this report for a discussion of the CARES Act. As of June 30, 2020,PSP2 Note.
On April 29, 2021, United entered into a PSP3 Agreement with Treasury, providing the Company receivedwith total funding of approximately $4.5$2.8 billion, consisting of approximately $2.0 billion as a direct grant and $810 million as indebtedness evidenced by the PSP3 Note. See Note 8 to the financial statements included in Part I, Item 1 of this report for a discussion of the expected $5.0 billion through the Payroll Support Program under the CARES Act. The approximately $500 million remaining balance is expected to be received by the end of July 2020. The Company also submitted an application to the Loan Program under the CARES Act, pursuant to which the Company expects to have the ability, through March 26, 2021, to borrow up to approximately $4.5 billion from the U.S. Treasury Department for a term of up to five years.PSP3 Note.
Several of the Company's debt agreements contain covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness and pay dividends on or repurchase stock. As of June 30, 2020,2021, UAL and United were in compliance with their respective debt covenants. In addition, in connection with any borrowings under the Loan Program under the CARES Act, the Company and its business will be subject to certain restrictions.
We have a significant amount of fixed obligations, including debt, and leases of aircraft, airport and other facilities, and pension funding obligations. As of June 30, 2020,2021, the Company had approximately $19.2$41.8 billion of debt, and finance lease, operating lease and sale-leaseback obligations, including $4.5$2.6 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. As of June 30, 2020, our current liabilities exceeded our current assets by approximately $6.4 billion. At June 30, 2020, $5.0 billion of current liabilities related to tickets sold to passengers for travel beyond June 30, 2020. While we expect many of those passengers to travel,
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canceling flights could result in refunds or the issuance of significant amounts of electronic travel certificates and future flight credits which can be applied towards the purchase of future tickets.
As of June 30, 2020,2021, United had firm commitments and options to purchase aircraft from The Boeing Company ("Boeing"),and Airbus S.A.S. ("Airbus") and Embraer S.A. ("Embraer") as presented in the table below:
Scheduled Aircraft Deliveries
Aircraft TypeNumber of Firm
 Commitments (a)		Last Six Months
of 2021		20222023After 2022
Airbus A321XLR50 — — — 50
Airbus A321neo70 — — 16 54
Airbus A35045 — — — 45
Boeing 737 MAX380 13 40 122 205
Boeing 7878 8 — — — 
(a) United also has options and purchase rights for additional aircraft.
    Scheduled Aircraft Deliveries
Aircraft Type Number of Firm
Commitments (a)		 Last Six Months of 2020 2021 2022 After 2022
Airbus A321XLR 50
 —
 —
 —
 50
Airbus A350 45
 —
 —
 —
 45
Boeing 737 MAX 171
 16
 24
 —
 131
Boeing 787 16
 8
 8
 —
 —
Embraer E175 20
 16
 4
 —
 —
(a) United also has options and purchase rights for additional aircraft.          
The aircraft listed in the table above are scheduled for delivery through 2030. To the extent the Company and the aircraft manufacturers with whom the Company has existing orders for new aircraft agree to modify the contracts governing those orders, or to the extent rights are exercised pursuant to the relevant agreements to modify the timing of deliveries, the amount and timing of the Company's future capital commitments could change. The Company may assign the purchase obligation for each of the 20 Embraer E175 aircraft to one of its regional partners at the time of such aircraft's delivery, subject to certain conditions.
Following the Federal Aviation Administration ("FAA") order issued on March 13, 2019 prohibiting the operation of Boeing 737 MAX series aircraft by U.S. certificated operators ("FAA Order"), Boeing suspended deliveries of new Boeing 737 MAX aircraft. As a result, scheduled deliveries of Boeing 737 MAX series aircraft have been delayed, and the Company expects these delays to continue. The extent of the delay to the scheduled deliveries of new Boeing 737 MAX aircraft is expected to be impacted by the length of time the FAA Order remains in place, Boeing's production rate and the pace at which Boeing can deliver aircraft following the lifting of the FAA Order, among other factors, and these factors have been and could continue to be significantly impacted by the COVID-19 pandemic.
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United also has agreementsan agreement to purchase 20six used Boeing 737-700 aircraft, which it intends to sell, with expected delivery dates in 2021. In addition, United has an agreement to purchase 11 used Airbus A319 aircraft, which it intends to sell, with expected delivery dates through 2022in 2021 and 13 used Boeing 737-700 aircraft with expected delivery dates through 2021.2022.
On April 17,In 2020, United entered into an agreementagreements with BOC Aviation (USA) Corporation ("BOCA"), a subsidiary of BOC Aviation Limited,third parties to finance through a sale and leaseback transaction sixtransactions new Boeing model 787-9787 aircraft and 16 new Boeing model 737-9737 MAX aircraft subject to purchase agreements between United and Boeing. In connection with the delivery of each aircraft from Boeing, United will assignassigned its right to purchase such aircraft to BOCA,the buyer, and simultaneous with BOCA'sthe buyer's purchase from Boeing, United will enterentered into a long-term lease for such aircraft with BOCA. Twothe buyer as lessor. Eleven Boeing model 787-9 aircraft were delivered in the second quarter of 20202021 under this transactionthese transactions (and each is presently subject to a long-term lease from BOCA to United), and. Remaining aircraft in the remaining 20 aircraftagreements are scheduled to be delivered throughin the endlast six months of 2020.2021.
As of June 30, 2020,2021, UAL and United have total capital commitments related to the acquisition of aircraft and related spare engines, aircraft improvements and non-aircraft capital commitments for approximately $24.9$35.3 billion, of which approximately $1.8$3.1 billion, $3.5$3.4 billion, $1.3$7.4 billion, $2.7$4.7 billion, $1.7$4.3 billion and $13.9$12.4 billion are due in the last six months of 20202021 and for the full year for 2021,years 2022, 2023, 2024, 2025 and thereafter, respectively. To the extent the Company and Boeing agree to modify the timing of Boeing 737 MAX deliveries, the amount and timing of the Company's future capital commitments could change.
We must returnexpect that our 2021 liquidity needs will be met through our existing liquidity levels. While we have been able to profitability and/or access the capital markets to meet our significant long-term debt and finance lease obligations and future commitments for capital expenditures, including the acquisition of aircraft and related spare engines. Financingengines, we must return to profitability in order to service our debt and maintain appropriate liquidity levels for our long-term operating needs. We may be necessary to satisfy the Company's capital commitmentsalso pursue financing options for itsour firm order aircraft and other related capital expenditures.expenditures consistent with our historical practice prior to the onset of the COVID-19 pandemic. The Company has backstop financing commitments available from certain of its aircraft manufacturers for a limited number of its future aircraft deliveries, subject to certain customary conditions.
See Note 108 to the financial statements included in Part I, Item 1 of this report for additional information on aircraft financing and other debt instruments.
As of June 30, 2020,2021, a substantial portion of the Company's assets, principally aircraft and certain related assets, its loyalty program, certain route authorities and airport slots, was pledged under various loan and other agreements. On July 2, 2020, substantially allAs of April 21, 2021, the assets of MPH and MIPA were pledged as security in connection with the MileagePlus Financing. The Company has
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unencumbered assets, including aircraft, engines, spare parts and other physical assets, routes, and slots and gates, among other items, available to be pledged as collateral for future financings, if needed.the Notes and the New Loan Facilities the following: (i) all of United's route authorities granted by the U.S. Department of Transportation to operate scheduled service between any international airport located in the United States and any international airport located in any country other than the United States (except Cuba), (ii) United's rights to substantially all of its landing and take-off slots at foreign and domestic airports, including at John F. Kennedy International Airport, LaGuardia Airport and Ronald Reagan Washington National Airport (subject to certain exclusions), and (iii) United's rights to use or occupy space at airport terminals, each to the extent necessary at the relevant time for servicing scheduled air carrier service authorized by an applicable route authority.
Credit Ratings. As of the filing date of this report, UAL and United had the following corporate credit ratings:
S&PMoody'sFitch
UALB+Ba2BB-B+
UnitedB+*BB-B+
 * The credit agency does not issue corporate credit ratings for subsidiary entities.
These credit ratings are below investment grade levels; however, the Company has been able to secure financing with investment grade credit ratings for certain enhanced equipment trust certificates ("EETCs"), term loans and term loans.secured bond financings. Downgrades from current rating levels, among other things, could restrict the availability and/or increase the cost of future financing for the Company.
Sources and Uses of Cash
Operating Activities. Cash flows usedprovided by operations were $67 million$3.1 billion for the six months ended June 30, 20202021 compared to $4.6 billion provided bycash flows used in operations inof $67 million for the same period in 2019.2020. The decreaseincrease is primarily attributable to improvements in the demand for passenger travel as well as government grant funding provided under the PSP2 Agreement and PSP3 Agreement of $4.1 billion partially offset by continuing operating losses as a $4.6 billion decrease in operating income forresult of the first six months of 2020 as compared to the same period in 2019.COVID-19 pandemic.
Investing Activities. Capital expenditures were approximately $2.0$1.3 billion and $2.5$2.0 billion in the six months ended June 30, 20202021 and 2019,2020, respectively. Capital expenditures for the six months ended June 30, 20202021 were primarily attributable to additions of newadvance deposits for future aircraft aircraft improvements, and increases in facility and information technology assets.purchases.
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Financing Activities. Significant financing events in the six months ended June 30, 2021 were as follows:
Debt, Finance Lease and Other Financing Liability Principal Payments. During the six months ended June 30, 2021, the Company made payments for debt, finance leases and other financing liabilities of $4.1 billion, primarily for repayments of $1.4 billion aggregate principal amount outstanding under the 2017 Term Loan Facility, $1.0 billion aggregate principal amount outstanding under the 2017 Revolving Credit Facility and $520 million aggregate principal amount outstanding under the CARES Act Loan.
Debt Issuances. During the six months ended June 30, 2020, the Company made debt and finance lease payments of $564 million.
In the six months ended June 30, 2020, the Company2021, United received and recorded $4.4 billionrecorded:
•$870 million from various credit agreements, including the PSP Note andPSP2 Note;
•$600 million of proceeds as debt from the EETC pass-through trusts established in September 2019. February 2021;
•$810 million from the PSP3 Note;
•$5.0 billion from the New Term Loan Facility; and
•$4.0 billion from the 2026 Notes and 2029 Notes.
See Note 108 to the financial statements included in Part I, Item 1 of this report for additional information.
InShare Issuance. During the six months ended June 30, 2020,2021, the Company receivedraised approximately $1.1 billion$532 million in net cash proceeds from the issuance and sale of UAL common stock.
Share Repurchase Programs. Instock through "at the six monthsmarket offerings" under equity distribution agreements entered into in June 2020 and March 2021. During the quarter ended June 30, 2020, UAL repurchased2021, approximately 4.3 million8,300 shares were sold through "at the market offerings" under such equity distribution agreements at an average price of UAL common stock in open market transactions for $0.3 billion. On February 24, 2020,$55.13 per share, with net proceeds to the Company suspended share repurchases under its share repurchase program authorized by UAL's Board of Directors in July 2019. UAL's Board of Directors subsequently terminated this share repurchase program on April 24, 2020. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this report for additional information.totaling approximately $0.5 million.
Commitments, Contingencies and Liquidity Matters. As described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 (the "2019"2020 Form 10-K") and in Part II, Item 1A. Risk Factors of this report,, the Company's liquidity may be adversely impacted by a variety of factors, including, but not limited to, pension funding obligations, reserve requirements associated with credit card processing agreements, guarantees, commitments, contingencies and the ongoing impact of the COVID-19 pandemic.
See the 20192020 Form 10-K and Notes 5, 6, 7, 8 9, 10 and 119 to the financial statements contained in Part I, Item 1 of this report for additional information.
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CRITICAL ACCOUNTING POLICIES
See "Critical Accounting Policies" in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in the 20192020 Form 10-K.
FORWARD-LOOKING INFORMATION
Certain statements throughout Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this report, including statements regarding the potential impacts of the COVID-19 pandemic and steps the Company plans to take in response thereto, are forward-looking and thus reflect the Company'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'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," "intends," "anticipates," "indicates," "remains," "believes," "estimates," "forecast," "guidance," "outlook," "goals", "targets" and similar expressions are intended to identify forward-looking statements.
Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as conditional statements, statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this report are based upon information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law.
Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: the duration and spreadadverse impacts of the ongoing COVID-19 global COVID-19 pandemic, and the outbreakpossible outbreaks of any otheranother disease or similar public health threat andin the impactfuture, on theour business, operating results, of operations and financial condition, of the Company; the impact of workforce reductions on the Company's business; the lenders' ability to accelerate the MileagePlus indebtedness, foreclose upon the collateral securing the MileagePlus indebtedness or exercise other remedies if the Company is not able to comply with the covenants in the MileagePlus financing agreements; the final terms of borrowing pursuant to the Loan Program under the CARES Act, if any, and the effects of the grant and promissory note through the Payroll Support Program under the CARES Act; the costs and availability of financing; our significant amount of financial leverage from fixed obligations and ability to seek additional liquidity and maintain adequate liquidity; our ability to comply with the terms of our various financing arrangements; our ability to utilize our net operating losses to offset future taxable income; the material disruption of ournear-term and long-term strategic operating plan, as a resultincluding possible additional adverse impacts resulting from the duration and spread of the COVID-19 pandemic, and our ability to execute our strategic operating plans in the long term; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); risks of doing business globally, including instability and political developments that may impact our operations in certain countries; demand for travel and the impact that globalpandemic; unfavorable economic and political conditions have on customer travel patterns; our capacity decisionsin the United States and globally; the capacity decisionshighly competitive nature of our competitors; competitive pressures on pricingthe global airline industry and on demand;susceptibility of the industry to price discounting and changes in aircraftcapacity; high and/or volatile fuel prices;prices or significant disruptions in ourthe supply of aircraft fuel; our abilityreliance on technology and automated systems to cost-effectively hedge against increases inoperate our business and the price of aircraft fuel, if we decide to do so; the effectsimpact of any significant failure or disruption of, or failure to effectively integrate and implement, the technology failures or cybersecurity or significant data breaches; disruptions to services provided bysystems; our reliance on third-party service providers;providers and the impact of any significant failure of these parties to perform as expected, or interruptions in our relationships with these providers or their provision of services; adverse publicity, harm to our brand; reduced travel demand, potential reputationaltort liability and voluntary or other impact from adverse eventsmandatory operational restrictions as a result of an accident, catastrophe or incident involving our aircraft or operations, the aircraft or operations ofus, our regional carriers, or our code sharecodeshare partners, or the aircraft or operations of another airline; our ability to attract and retain customers; the effects of any terrorist attacks, international hostilities or other security events, or the fear of such events;terrorist attacks or hostilities, even if not made directly on the mandatory grounding of aircraft in our fleet;airline industry; increasing privacy and data security obligations or a significant data breach; disruptions to our regional network as a resultand United Express flights provided by third-party regional carriers; the failure of the COVID-19 pandemic or otherwise; the impact of regulatory, investigative and legal proceedings and legal compliance risks; the success of our significant investments in other airlines, including inequipment manufacturers and other parts ofaviation industry participants to produce the world, which involve significant challengesreturns or results we expect; further changes to the airline industry with respect to alliances and risks, particularly given the impact of the COVID-19 pandemic; industry consolidationjoint business arrangements or due to consolidations; changes in airline alliances; the ability ofour network strategy or other air carriers with whom we have alliances or partnershipsfactors outside our control resulting in less economic aircraft orders, costs related to provide the services contemplated by the respective arrangements with such carriers; costs associated with any modification or termination of aircraft orders or entry into less favorable aircraft orders, as well as any inability to accept or integrate new aircraft into our fleet as planned; our reliance on single suppliers to source a majority of our aircraft orders; disruptions in the availability of aircraft,and certain parts, or support from our suppliers; our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; labor costs; the impact of any management changes;failure to obtain timely deliveries, additional equipment or support from any of these suppliers; the impacts of union disputes, employee strikes or slowdowns, and other labor-related disruptions on our operations; extended interruptions or disruptions in service at major airports where we operate; U.S. or foreign governmental legislation, regulationthe impacts of seasonality and other actions (including Open Skies agreements, environmental regulations and the United Kingdom's withdrawal from the European Union); the seasonality offactors associated with the airline industry; weather conditions; the costs and availability of aviation and other insurance; our abilityfailure to realize the full value of our intangible assets andor our long-lived assets;assets, causing us to record impairments; any impactdamage to our reputation or brand image; the limitation of our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income for U.S. federal income tax purposes; the costs of compliance with extensive government regulation of the airline industry; costs, liabilities and risks associated with environmental regulation and climate change; the impacts of our significant amount of financial leverage from fixed obligations, the possibility we may seek material amounts of additional financial liquidity in the short-term and the impacts of insufficient liquidity on our financial condition and business; failure to comply with the covenants in the MileagePlus financing agreements, resulting in the possible acceleration of the MileagePlus indebtedness, foreclosure upon the collateral securing the MileagePlus indebtedness or the exercise of other remedies; failure to comply with financial and other covenants governing our other debt; changes in, or failure to retain, our senior management team or other key employees; current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or arrangement relating to these actions; increases in insurance costs or inadequate insurance coverage; and other risks and uncertainties set forth under Part I,II, Item 1A., Risk Factors, of our 2019 Form 10-
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K, and Part II, Item 1A., Risk Factors, of this report, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission (the "SEC").
ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There have been no material changes in market risk from the information provided in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our 20192020 Form 10-K other than related to interest rates, as discussed below.10-K.
Interest Rates. Our net income is affected by fluctuations in interest rates (e.g. interest expense on variable rate debt). The Company's policy is to manage interest rate risk through a combination of fixed and variable rate debt.
At June 30, 2020, we had $11.2 billion of fixed-rate debt and $7.6 billion of variable-rate debt. An increase of 100 basis points in average annual interest rates on June 30, 2020 would have decreased the estimated fair value of our fixed-rate debt by $535 million as of such date and would have increased the annual interest expense on our variable-rate debt by $55 million. On July 2, 2020, our variable-rate debt increased to $11.6 billion. An increase of 100 basis points in average annual interest rates on July 2, 2020 would have increased the annual interest expense on our variable-rate debt by $75 million.
As announced in July 2017, LIBOR is expected to be phased out by the end of 2021. Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR may adversely impact our interest rates and related interest expense.
ITEM 4.     CONTROLS AND PROCEDURES.
Evaluation of Disclosure Control and Procedures
UAL and United each maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted by UAL and United to the SEC is recorded, processed, summarized and reported, within the time periods specified by the SEC'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's and United's disclosure controls and procedures were designed and operating effectively to report the information each company is required to disclose in the reports it files 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 June 30, 2020,2021, disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting during the Quarter Ended June 30, 20202021
During the three months ended June 30, 2020,2021, there were no changes in UAL's or United'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 Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).
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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Part I, Item 3, Legal Proceedings, of the 20192020 Form 10-K for a description of legal proceedings.

ITEM 1A. RISK FACTORS

See Part I, Item 1A, Risk Factors,The following risk factors should be read carefully when evaluating the Company's business and the forward-looking statements contained in this report and other statements the Company or its representatives make from time to time. Any of the 2019 Form 10-Kfollowing risks could materially and adversely affect the Company's business, operating results, financial condition and the actual outcome of matters as to which forward-looking statements are made in this report.Risks not currently known to the Company or that the Company currently deems to be immaterial may also materially and adversely affect the Company's business, operating results, financial condition and the actual outcome of matters as to which forward-looking statements are made in this report.
Risk Factor Summary
The following is a summary of the principal risks that could adversely affect, or have adversely affected, the Company's business, operating results and financial condition:
•The adverse impacts of the ongoing COVID-19 global pandemic, and possible outbreaks of another disease or similar public health threat in the future, on our business, operating results, financial condition, liquidity and near-term and long-term strategic operating plan, including possible additional adverse impacts resulting from the duration and spread of the pandemic;
•Unfavorable economic and political conditions in the United States and globally;
•The highly competitive nature of the global airline industry and susceptibility of the industry to price discounting and changes in capacity;
•High and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel;
•Our reliance on technology and automated systems to operate our business and the impact of any significant failure or disruption of, or failure to effectively integrate and implement, the technology or systems;
•Our reliance on third-party service providers and the impact of any failure of these parties to perform as expected, or interruptions in our relationships with these providers or their provision of services;
•Adverse publicity, harm to our brand, reduced travel demand and potential tort liability as a result of an accident, catastrophe or incident involving us, our regional carriers, our codeshare partners, or another airline;
•Terrorist attacks, international hostilities or other security events, or the fear of terrorist attacks or hostilities, even if not made directly on the airline industry;
•Increasing privacy and data security obligations or a significant data breach;
•Disruptions to our regional network and United Express flights provided by third-party regional carriers;
•The failure of our significant investments in other airlines, equipment manufactures and other aviation industry participants, including AVH and its affiliates, and the commercial relationships that we have with those entities, to produce the returns or results we expect;
•Further changes to the airline industry with respect to alliances and JBAs or due to consolidations;
•Changes in our network strategy or other factors outside our control resulting in less economic aircraft orders, costs related to modification or termination of aircraft orders or entry into less favorable aircraft orders, and any inability to accept or integrate new aircraft into the Company's fleet as planned;
•Our reliance on single suppliers to source a majority of our aircraft and certain parts, and the impact of any failure to obtain timely deliveries, additional equipment or support from any of these suppliers;
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•The impacts of union disputes, employee strikes or slowdowns, and other labor-related disruptions on our operations;
•Extended interruptions or disruptions in service at major airports where we operate;
•The impacts of seasonality and other factors associated with the airline industry;
•Our failure to realize the full value of our intangible assets or our long-lived assets, causing us to record impairments;
•Any damage to our reputation or brand image;
•The limitation of our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income for U.S. federal income tax purposes;
•The costs of compliance with extensive government regulation of the airline industry;
•Costs, liabilities and risks associated with environmental regulation and climate change;
•The impacts of our significant amount of financial leverage from fixed obligations, the possibility we may seek material amounts of additional financial liquidity in the short-term and insufficient liquidity on our financial condition and business;
•Failure to comply with the covenants in the MileagePlus Financing agreements, resulting in the possible acceleration of the MileagePlus indebtedness, foreclosure upon the collateral securing the MileagePlus indebtedness or the exercise of other remedies;
•Failure to comply with financial and other covenants governing our other debt;
•Changes in, or failure to retain, our senior management team or other key employees;
•Current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or arrangement relating to these actions; and
���Increases in insurance costs or inadequate insurance coverage.
For a detailedmore complete discussion of the risk factors affecting UAL and United. As of June 30, 2020, there have been no material changesrisks facing the Company's business, see below.
Risks Relating to those risk factors, except as set forth below:COVID-19
The global pandemic resulting from a novel strain of coronavirus has had an adverse impact that has been material to the Company's business, operating results, financial condition and liquidity, and the duration and spread of the pandemic could result in additional adverse impacts. The outbreak of another disease or similar public health threat in the future could also have an adverse effect on the Company's business, operating results, financial condition and liquidity.
In December 2019, aThe novel strain of coronavirus ("COVID-19") was reported(COVID-19) pandemic, together with the measures implemented or recommended by governmental authorities and private organizations in Wuhan, China,response to the pandemic, has had an adverse impact that has been material to the Company's business, operating results, financial condition and the World Health Organization subsequently declared COVID-19 a "pandemic." As a result of COVID-19, the U.S. government declared a national emergency, the U.S. Department of State issued numerous travel advisories, including a global Level 4 "do not travel" advisory advising U.S. citizens to avoid all international travel, and the U.S. government has implemented a number of travel-related protocols, including enhanced screenings and mandatory 14-day quarantines. Many foreign and U.S. state and local governments have instituted similar measures and declared states of emergency.
In the United States and other locations around the world, throughout the first half of 2020, people were instructed to stay home orliquidity. Measures such as "shelter in place" or quarantine requirements, international and domestic travel restrictions or advisories, limitations on public events, suchgatherings, social distancing recommendations, remote work arrangements and closures of tourist destinations and attractions, as conferences, sporting eventswell as consumer perceptions of the safety, ease and concerts, have been canceled, attractions, including theme parks and museums, have been closed, cruise lines have suspended operations and schools and businesses are operating with remote attendance, among other actions. In addition, governments, non-governmental organizations and entities in the private sector have issued non-binding advisories or recommendations regardingpredictability of air travel, or other social distancing measures, including limitations on the number of persons that should be present at public gatherings. While "sheltercontributed to a precipitous decline in place" restrictionspassenger demand and similar advisoriesbookings for both business and recommendations have been reduced or otherwise eased in certain circumstances, this varies by jurisdiction and organization. In addition, numerous jurisdictions have imposed or reinstated more severe restrictions as a result of the continued spread of COVID-19 or resurgences in the severity of COVID-19 in certain locations, including travel restrictions, mandatory self-quarantine requirements and other enhanced COVID-19-related screening measures that may apply to our personnel and/or the traveling public.leisure travel.
The Company began experiencing a significant decline in international and domestic demand related to COVID-19 during the first quarter of 2020. The decline in demand caused a material deterioration in our revenues in the first half of 2020, resulting in a net loss of $3.3 billion for$7.1 billion. The full extent of the ongoing impact of COVID-19 on the Company's longer-term operational and financial performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus in different markets, the introduction and spread of new variants of the virus that period. Although during the second quarter of 2020 the Company experienced modest, but steady improvement in demand, the Company has since experienced reduced demand and increased cancellationsmay be resistant to destinations experiencing increases in COVID-19 cases and/or new quarantinecurrently approved vaccines, passenger testing requirements, imposed in certain jurisdictionsmask mandates or other restrictions on travel.travel, all of which are highly uncertain and cannot be predicted with certainty. In response to decreased demand, the Company cut, relative to 2019 capacity, approximately 88%57% of its scheduled capacity for 2020. In the second quarter of 2020. 2021, scheduled capacity was down approximately 46% versus the second quarter of 2019. However, since March 2021, the Company has seen increasing demand for travel both domestically and in countries where entry is permitted.The Company currently expects scheduled capacity to be down approximately 65% year-over-year infor the third quarter of 2020. The Company also expects its scheduled capacity in the fourth quarter of 20202021 to be generally consistent withdown 26% compared to the third quarter of 2020. The Company plans to continue to proactively evaluate2019. However, as noted above, the full extent of the ongoing impact of COVID-19 on the Company's longer-term operational and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand. The Company expects demand to remain suppressed until a widely accepted treatment and/or vaccine for COVID-19 is available. In addition, the Company does not currently expect the recovery from COVID-19 to follow a linear path.
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financial performance will depend on future developments, including vaccination programs, new variants of the virus and government-imposed travel restrictions.As such, the Company's actual flown capacity may differ materially from its currently scheduled capacity.
The Company has taken a number of actions in response to the decreased demand for air travel. In addition to the schedule reductions discussed above, the Company has reduced its planned capital expenditurestravel, including those described in Part I. Item 2, Management's Discussion and reduced operating expenditures for the remainderAnalysis of 2020Financial Condition and 2021 (including by postponing projects deemed non-critical to the Company's operations), terminated its share repurchase program, issued or entered into approximately $10.0 billionResults of Operations, of this report and in secured notes, secured term loan facilitiesPart II, Item 7, Management's Discussion and new aircraft financings, including $6.8 billionAnalysis of senior secured notesFinancial Condition and a secured term loan facility (the "MileagePlus Financing") secured by substantially allResults of Operations, of the assets of Mileage Plus Holdings, LLC, a direct wholly-owned subsidiary of United ("MPH"), and Mileage Plus Intellectual Property Assets, Ltd., an indirect wholly-owned subsidiary of MPH ("MIPA"), raised approximately $1.1 billion in cash proceeds in an underwritten public offering of UAL common stock, entered into an equity distribution agreement relating to the issuance and sale, from time to time, of up to 28 million shares of UAL common stock, borrowed $1.0 billion under the Company's $2.0 billion revolving credit facility, entered into an agreement to finance certain aircraft currently subject to purchase agreements through a sale and leaseback transaction, deferred certain payroll taxes pursuant to the CARES Act, temporarily grounded certain of its mainline fleet and taken a
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number of actions to reduce employee-related costs. In addition, on April 20, 2020 in connection with the Payroll Support Program under the CARES Act, United entered into a Payroll Support Program Agreement with the U.S. Treasury Department providing the Company with total funding of approximately $5.0 billion to pay the salaries and benefits of employees through September 30, 2020. The Company has received approximately $4.5 billion of the expected $5.0 billion through the Payroll Support Program under the CARES Act. The remaining balance is expected by the end of July 2020. The Company also expects to have the ability, through March 26, 2021, to borrow up to approximately $4.5 billion from the U.S. Treasury Department for a term of up to five years pursuant to the Loan Program under the CARES Act.Form 10-K. The grants and/orand loans under the CARESCoronavirus Aid, Relief, and Economic Security Act will(the "CARES Act"), as extended, subject the Company and its business to certain restrictions, including, but not limited to, restrictions on the payment of dividends and the ability to repurchase UAL's equity securities,securities; requirements to maintain certain levels of scheduled service, requirements to recall certain furloughed employees and maintain U.S. employment levels through September 30, 2020, requirements to issue warrants for UAL common stock to2021 or the U.S. Treasury Departmentdate on which the Company has expended all of the support, whichever is later and certain limitations on executive compensation. These restrictions and requirements have materially affected and will continue to materially affect the Company's operations, and the Company may not be successful in managing these impacts for the duration of the restrictions. In particular, limitations on executive compensation which, depending on the form of aid, could extend up to six years, may impact the Company's ability to attract and retain senior management or attract other key employees during this critical time.
The Company continues to focus on reducing expenses and managing its liquidity. The Company currently expects daily cash burn during the third quarter of 2020 to average approximately $25 million per day. For this purpose, "cash burn" is defined as net cash from operations, less investing and financing activities. Proceeds from the issuance of new debt (excluding expected aircraft financing), government grants associated with the Payroll Support Program of the CARES Act, issuance of new UAL common stock, net proceeds from sale of short-term and other investments and changes in restricted cash balances are not included in this figure. The Company's management views daily "cash burn" as an important measure in monitoring liquidity in order to assess the Company's cash needs without the impact of certain extraordinary actions or events, and the Company believes this provides useful information to investors about the Company's liquidity position. We expect to continue to modify our cost management structure, liquidity-raising efforts and capacity as the timing of demand recovery becomes more certain. The Company's reduction in expenditures, measures to improve liquidity or other strategic actions that the Company may take in the future in response to COVID-19 may not be effective in offsetting decreased demand, and the Company will not be permitted to take certain strategic actions as a result of the CARES Act, which could result in a material adverse effect on the Company's business, operating results and financial condition.
The full extent of the ongoing impact of COVID-19 on the Company's longer-term operational and financial performance and liquidity position will depend on future developments, many of which are outside of our control, including the effectiveness of the mitigation strategies discussed above in offsetting decreased demand so long as demand remains suppressed, the duration and spread of COVID-19 in different markets and related travel advisories and restrictions,governmental actions, the impact of COVID-19 on overall long-term domestic and international demand for air travel, including the impact on overall demand for business travel as a result of increased usage of teleconferencing and other technologies, and the impact of COVID-19 on the financial health and operations of the Company's business partners andpartners. All of these future governmental actions, including whether applicable governmental authorities will continue to grant waivers of usage requirements for certain of the Company's slots, routes and gates, and all of whichdevelopments are highly uncertain and cannot be predicted.predicted with certainty. The COVID-19 pandemic has had a material impact on the Company, and the continuation of reduced demand could have a material adverse effect on the Company's business, operating results, financial condition and liquidity.
In addition, an outbreak of another disease or similar public health threat, or fear of such an event, that affects travel demand, travel behavior or travel restrictions could have a material adverse impact on the Company's business, financial condition and operating results. Outbreaks of other diseases could also result in increased government restrictions and regulation, such as those actions described above or otherwise, which could adversely affect our operations.
COVID-19 materially disrupted our strategic operating plans in the near-term, and there are risks to our business, operating results and financial condition associated with adjusting and executing our strategic operating plans in the long-term.
COVID-19 materially disrupted our strategic operating plans in the near-term, and there are risks to our business, operating results and financial condition associated with adjusting and executing our strategic operating plans in the long-term. In recent years, we have announced several strategic operating plans, including several revenue-generating initiatives and plans to optimize our revenue, such as our plans to add capacity, including international expansion and new or increased service to mid-size airports, initiatives and plans to optimize and control our costs and opportunities to enhance our segmentation and improve the customer experience at all points in air travel. In the second quarter of 2021, we announced the "United Next" plan, including firm orders of 200 Boeing 737 MAX aircraft and 70 Airbus A321neo aircraft, plans to retrofit the remaining mainline, narrow-body fleet to transform the customer experience and create a new signature interior and plans to increase the number of mainline daily departures and available seats across our North American network.In developing our strategic operating plans, we make certain assumptions, including, but not limited to, those related to customer demand, competition, market consolidation, the availability of aircraft and the global economy. Actual economic, market and other conditions have been and may continue to be different from our assumptions. Most significantly in 2020, the precipitous decline in demand for air travel required us to cut, rather than grow, capacity, and materially and adversely impacted our ability to execute our strategic operating plans.We have since adjusted our strategic operating plans based on our expectations for increased customer demand with the "United Next" plan.If we do not successfully execute or adjust our strategic operating plans in the long-term, or if actual results continue to vary significantly from our assumptions, our business, operating results and financial condition could be materially and adversely impacted.
Risks Relating to Our Business and Industry
Unfavorable economic and political conditions, in the United States and globally, may have a material adverse effect on our business, operating results and financial condition.
The Company's business and operating results are significantly impacted by U.S. and global economic and political conditions. The airline industry is highly cyclical, and the level of demand for air travel is correlated to the strength of the U.S.
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and global economies. Robust demand for the Company's air transportation services depends largely on favorable economic conditions, including the strength of the domestic and foreign economies, low unemployment levels, strong consumer confidence levels and the availability of consumer and business credit. Air transportation is often a discretionary purchase that leisure travelers may limit or eliminate during difficult economic times. Short-haul travelers, in particular, have the option to replace air travel with surface travel. In addition, during periods of unfavorable economic conditions, business travelers historically have reduced the volume of their travel, either due to cost-saving initiatives, the replacement of travel with alternatives such as videoconferencing, or as a result of decreased business activity requiring travel. During such periods, the Company's business and operating results may be adversely affected due to significant declines in industry passenger demand, particularly with respect to the Company's business and premium cabin travelers, and a reduction in fare levels.
As a global business with operations outside of the United States from which it derives significant operating revenues, volatile conditions in certain international regions may have a negative impact on the Company's operating results and its ability to achieve its business objectives. The Company's international operations are a vital part of its worldwide airline network. Political disruptions and instability in certain regions can negatively impact the demand and network availability for air travel. Additionally, any deterioration in global trade relations, such as increased tariffs or other trade barriers, could result in a decrease in the demand for international air travel.
Stagnant or weakening global economic conditions either in the United States or in other geographic regions may have a material adverse effect on the Company's revenues, operating results and liquidity.
The global airline industry is highly competitive and susceptible to price discounting and changes in capacity, which could have a material adverse effect on our business, operating results and financial condition.
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. Consolidation in the airline industry, the rise of well-funded government sponsored international carriers, changes in international alliances and the creation of immunized joint business arrangements ("JBAs") have altered and are expected to continue to alter the competitive landscape in the industry, resulting in the formation of airlines and alliances with increased financial resources, more extensive global networks and services and competitive cost structures.
Airlines also compete by increasing or decreasing their capacity, including route systems and the number of destinations served. Several of the Company's domestic and international competitors have increased their international capacity by including service to some destinations that the Company currently serves, causing overlap in destinations served, and therefore, increasing competition for those destinations. This increased competition in both domestic and international markets may have a material adverse effect on the Company's business, operating results and financial condition.
The Company's U.S. operations are subject to competition from traditional network carriers, national point-to-point carriers, and discount carriers, including low-cost carriers and ultra-low-cost carriers. Such carriers may have lower costs and provide service at lower fares to destinations also served by the Company. The significant presence of low-cost carriers and ultra-low-cost carriers, which engage in substantial price discounting, may diminish our ability to achieve sustained profitability on domestic and international routes. This level of discounted pricing has also caused us to reduce fares for certain routes, resulting in lower yields on many domestic markets. Our ability to compete in the domestic market effectively depends, in part, on our ability to maintain a competitive cost structure. If we cannot maintain our costs at a competitive level, then our business, operating results and financial condition could continue to be materially and adversely affected. In addition, our competitors have established new routes and destinations, including some at our hub airports, in light of the expansion opportunities presented by the COVID-19 pandemic, which may compete with our existing routes and destinations and expansion plans.
Our international operations are subject to competition from both foreign and domestic carriers. Competition is significant from government subsidized competitors from certain Middle East countries. These carriers have large numbers of international widebody aircraft on order and are increasing service to the U.S. from their hubs in the Middle East. The government support provided to these carriers has allowed them to grow quickly, reinvest in their product, invest in other airlines and expand their global presence. We also face competition from foreign carriers operating under "fifth freedom" rights permitted under international treaties that allow certain carriers to provide service to and from stopover points between their home country and ultimate destination, including points in the United States, in competition with service provided by us.
Through alliance and other marketing and codesharing agreements with foreign carriers, U.S. carriers have increased their ability to sell international transportation, such as services to and beyond traditional global gateway cities. Similarly, foreign carriers have obtained increased access to interior U.S. passenger traffic beyond traditional U.S. gateway cities through these relationships. In addition, several JBAs among U.S. and foreign carriers have received grants of antitrust immunity allowing the participating carriers to coordinate schedules, pricing, sales and inventory. If we are not able to continue
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participating in these types of alliance and other marketing and codesharing agreements in the future, our business, operating results and financial condition could be materially and adversely affected.
Our MileagePlus frequent flyer program benefits from the attractiveness and competitiveness of United Airlines as a material purchaser of award miles, and the majority recipient for mileage redemption. If we are not able to maintain a competitive and attractive airline business, our ability to acquire, engage and retain customers in the loyalty program may be adversely affected, which could adversely affect the loyalty program's operating results and financial condition.
Further our MileagePlus frequent flyer program also faces significant and increasing direct competition from the frequent flyer programs offered by other airlines, as well as from similar loyalty programs offered by banks and other financial services companies. Competition among loyalty programs is intense regarding customer acquisition incentives, the value and utility of program currency, rewards range and value, fees, required usage, and other terms and conditions of these programs. If we are not able to maintain a competitive frequent flyer program, our ability to attract and retain customers to MileagePlus and United alike may be adversely affected, which could adversely affect our enterprise operating results and financial condition.
High and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel could have a material adverse impact on the Company's strategic plans, operating results, financial condition and liquidity.
Aircraft fuel is critical to the Company's operations and is one of our largest operating expenses. During the year ended December 31, 2020, the Company's fuel expense was approximately $3.2 billion. The timely and adequate supply of fuel to meet operational demand depends on the continued availability of reliable fuel supply sources, as well as related service and delivery infrastructure. Although the Company has some ability to cover short-term fuel supply and infrastructure disruptions at some major demand locations, it depends significantly on the continued performance of its vendors and service providers to maintain supply integrity. Consequently, the Company can neither predict nor guarantee the continued timely availability of aircraft fuel throughout the Company's system.
Aircraft fuel has historically been the Company's most volatile operating expense due to the highly unpredictable nature of market prices for fuel. The Company generally sources fuel at prevailing market prices. Market prices for aircraft fuel have historically fluctuated substantially in short periods of time and continue to be highly volatile due to a dependence on a multitude of unpredictable factors beyond the Company's control. These factors include changes in global crude oil prices, the balance between aircraft fuel supply and demand, natural disasters, prevailing inventory levels and fuel production and transportation infrastructure. Prices of fuel are also impacted by indirect factors, such as geopolitical events, economic growth indicators, fiscal/monetary policies, fuel tax policies, changes in regulations, environmental concerns and financial investments in energy markets. Both actual changes in these factors, as well as changes in related market expectations, can potentially drive rapid changes in fuel prices in short periods of time.
Given the highly competitive nature of the airline industry, the Company may not be able to increase its fares and fees sufficiently to offset the full impact of increases in fuel prices, especially if these increases are significant, rapid and sustained. Further, any such fare or fee increase may not be sustainable, may reduce the general demand for air travel and may also eventually impact the Company's strategic growth and investment plans for the future. In addition, decreases in fuel prices for an extended period of time may result in increased industry capacity, increased competitive actions for market share and lower fares or surcharges. If fuel prices were to then subsequently rise quickly, there may be a lag between the rise in fuel prices and any improvement of the revenue environment.
To protect against increases in the market prices of fuel, the Company may hedge a portion of its future fuel requirements. The Company does not currently hedge its future fuel requirements. However, to the extent the Company decides to start a hedging program, such hedging program may not be successful in mitigating higher fuel costs, and any price protection provided may be limited due to the choice of hedging instruments and market conditions, including breakdown of correlation between hedging instrument and market price of aircraft fuel and failure of hedge counterparties. To the extent that the Company decides to hedge a portion of its future fuel requirements and uses hedge contracts that have the potential to create an obligation to pay upon settlement if fuel prices decline significantly, such hedge contracts may limit the Company's ability to benefit fully from lower fuel prices in the future. If fuel prices decline significantly from the levels existing at the time the Company enters into a hedge contract, the Company may be required to post collateral (margin) beyond certain thresholds. There can be no assurance that the Company's hedging arrangements, if any, will provide any particular level of protection against rises in fuel prices or that its counterparties will be able to perform under the Company's hedging arrangements. Additionally, deterioration in the Company's financial condition could negatively affect its ability to enter into new hedge contracts in the future.
The Company relies heavily on technology and automated systems to operate its business and any significant failure or disruption of, or failure to effectively integrate and implement, the technology or these systems could materially harm its business.
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The Company depends on automated systems and technology to operate its business, including, but not limited to, computerized airline reservation systems, electronic tickets, electronic airport kiosks, demand prediction software, flight operations systems, in-flight wireless internet, cloud-based technologies, revenue management systems, accounting systems, technical and business operations systems, telecommunication systems and commercial websites and applications, including www.united.com and the United Airlines app. United's website and other automated systems must be able to accommodate a high volume of traffic, maintain secure information and deliver important flight and schedule information, as well as process critical financial transactions. These systems could suffer substantial or repeated disruptions due to various events, some of which are beyond the Company's control, including natural disasters, power failures, terrorist attacks, equipment or software failures, cybersecurity attacks or other security breaches. We have initiatives in place to prevent disruptions and disaster recovery plans, and we continue to invest in improvements to these initiatives and plans; however, these measures may not be adequate to prevent or mitigate disruptions. Substantial or repeated systems failures or disruptions, including failures or disruptions related to the Company's complex integration of systems, could reduce the attractiveness of the Company's services versus those of our competitors, materially impair our ability to market our services and operate our flights, result in the unauthorized release of confidential or otherwise protected information, negatively impact our reputation among our customers and the public, subject us to liability to third parties, regulatory action or contract termination, result in other increased costs, lost revenue and the loss or compromise of important data.As a result, substantial or repeated systems failures or disruptions may adversely affect the Company's business, operating results and financial condition.
The Company may also face challenges in integrating, implementing and modifying the automated systems and technology required to operate its business. As a result of the complexity of such automated systems and technology, the integration, implementation and modification process may require significant expenditures, human resources, the development of effective internal controls and the transformation of business and financial processes. If the Company is unable to timely or effectively integrate, implement or modify its systems and technology, the Company's operations could be adversely affected.
The Company's business relies extensively on third-party service providers, including certain technology providers. Failure of these parties to perform as expected, or interruptions in the Company's relationships with these providers or their provision of services to the Company, could have a material adverse effect on the Company's business, operating results and financial condition.
The Company has engaged third-party service providers to perform a large number of functions that are integral to its business, including regional operations, operation of customer service call centers, distribution and sale of airline seat inventory, provision of information technology infrastructure and services, transmitting or uploading of data, provision of aircraft maintenance and repairs, provision of various utilities and performance of airport ground services, aircraft fueling operations and catering services, among other vital functions and services. The Company does not directly control these third-party service providers, although generally it does enter into agreements that define expected service performance and compliance requirements, such as compliance with legal requirements, including anti-corruption laws; however, there can be no assurance that our third-party service providers will adhere to these requirements.
Any of these third-party service providers, however, may materially fail to meet its service performance commitments to the Company or may suffer disruptions to its systems that could impact its services. For example, failures in certain third-party technology or communications systems may cause flight delays or cancellations. The failure of any of the Company's third-party service providers to perform its service obligations adequately, or other interruptions of services, may reduce the Company's revenues and increase its expenses, prevent the Company from operating its flights and providing other services to its customers or result in adverse publicity or harm to our brand. We may also be subject to consequences from any illegal conduct of our third-party service providers, including for their failure to comply with anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act. In addition, the Company's business and financial performance could be materially harmed if its customers believe that its services are unreliable or unsatisfactory.
The Company may also have disagreements with such providers or such contracts may be terminated or may not be extended or renewed. For example, the number of flight reservations booked through third-party GDSs or online travel agents ("OTAs") may be adversely affected by disruptions in the business relationships between the Company and these suppliers. Such disruptions, including a failure to agree upon acceptable contract terms when contracts expire or otherwise become subject to renegotiation, may cause the Company's flight information to be limited or unavailable for display by the affected GDS or OTA operator, significantly increase fees for both the Company and GDS/OTA users and impair the Company's relationships with its customers and travel agencies. Any such disruptions or contract terminations may adversely impact our operations and financial results.
If we are not able to negotiate or renew agreements with third-party service providers, or if we renew existing agreements on less favorable terms, our operations and financial results may be adversely affected.
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The Company could experience adverse publicity, harm to its brand, reduced travel demand, potential tort liability and voluntary or mandatory operational restrictions as a result of an accident, catastrophe or incident involving its aircraft or its operations, the aircraft or operations of its regional carriers, the aircraft or operations of its codeshare partners, or the aircraft or operations of another airline, which may result in a material adverse effect on the Company's business, operating results and financial condition.
An accident, catastrophe or incident involving an aircraft that the Company operates, or an aircraft that is operated by a codeshare partner, one of the Company's regional carriers or another airline, or an incident involving the Company's operations, or the operations of a codeshare partner, Original Equipment Manufacturers, one of the Company's regional carriers or of another airline, could have a material adverse effect on the Company if such accident, catastrophe or incident created a public perception that the Company's operations, or the operations of its codeshare partners or regional carriers, are not safe or reliable, or are less safe or reliable than other airlines. Additionally, any accident, catastrophe or incident involving an aircraft type that is operated by the Company, its codeshare partners or regional carriers could have a material adverse effect on the Company if such accident, catastrophe or incident creates a public perception that such aircraft type was not safe or reliable. Further, any such accident, catastrophe or incident involving the Company, its regional carriers or its codeshare partners could expose the Company to significant tort liability. Although the Company currently maintains liability insurance in amounts and of the type the Company believes to be consistent with industry practice to cover damages arising from any such accident, catastrophe or incident, and the Company's codeshare partners and regional carriers carry similar insurance and generally indemnify the Company for their operations, if the Company's liability exceeds the applicable policy limits or the ability of another carrier to indemnify it, the Company could incur substantial losses from an accident, catastrophe or incident which may result in a material adverse effect on the Company's operating results and financial condition. In addition, any such accident, catastrophe or incident involving the Company, its regional carriers or its codeshare partners could result in operational restrictions on the Company, including voluntary or mandatory groundings of aircraft. For example, the Company decided to voluntarily ground its Boeing 737 aircraft following certain electrical issues, and in February 2021, the FAA issued an Emergency Airworthiness Directive regarding certain Boeing 777 Pratt & Whitney powered aircraft. The resulting public perceptions of the safety of our operations and the reliability of certain Boeing 777 Pratt & Whitney powered aircraft and Boeing 737 aircraft, including the new Boeing 737 MAX 8 aircraft and Boeing 737 MAX 10 aircraft that the Company ordered in the second quarter of 2021, could adversely affect our business. A prolonged period of time operating a reduced fleet in these circumstances could result in a material adverse effect on the Company's operating results and financial condition.
In addition, the outbreak and spread of the COVID-19 pandemic have adversely impacted customer perceptions of the health and safety of travel and these negative perceptions could continue even after the pandemic subsides. Actual or perceived risk of infection on our flights, at airports and during other travel-related activities has had, and may continue to have, a material adverse effect on the public's perception of us, which has harmed, and may continue to harm, our reputation and business. We have incurred, and expect that we will continue to incur, COVID-19-related costs as we sanitize aircraft, implement additional hygiene-related protocols and take other actions to limit the threat of infection among our employees and passengers and combat negative customer perceptions of the health and safety of travel on our aircraft and at our terminals. Negative public perceptions could, in turn, result in adverse publicity for the Company, cause harm to the Company's brand and reduce travel demand on the Company's flights, or the flights of its codeshare partners or regional carriers.
Terrorist attacks, international hostilities or other security events, or the fear of terrorist attacks or hostilities, even if not made directly on the airline industry, could negatively affect the Company and the airline industry.
Terrorist attacks or international hostilities, even if not made on or targeted directly at the airline industry, or the fear of or the precautions taken in anticipation of such attacks (including elevated national threat warnings, travel restrictions, selective cancellation or redirection of flights and new security regulations) could materially and adversely affect the Company and the airline industry. Security events pose a significant risk to our passenger and cargo operations. These events could include acts of violence in public areas that we cannot control. The Company's financial resources may not be sufficient to absorb the adverse effects of any future terrorist attacks, international hostilities or other security events. Any such events could have a material adverse impact on the Company's financial condition, liquidity and operating results. In addition, due to threats against the aviation industry, the Company has incurred, and may continue to incur, significant expenditures to comply with security-related requirements to mitigate the threats and ensure the safety of our employees and customers. With the need to implement proper security measures, and the need to ensure the efficacy and efficiency of security inspection throughput to support the pace of our operations, it is unlikely that we will be able to capture all security-related costs through increased fares, which could adversely affect our operating results.
Increasing privacy and data security obligations or a significant data breach may adversely affect the Company's business.
In our regular business operations, we collect, process, store and transmit to commercial partners sensitive data, including personal information of our customers and employees such as payment processing information and information of our
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business partners. The Company depends on the ability to use information we collect to provide our services and operate our business.
The Company must manage increasing legislative, regulatory and consumer focus on privacy issues and data security in a variety of jurisdictions across the globe. For example, the EU's General Data Protection Regulation imposes significant privacy and data security requirements, as well as potential for substantial penalties for non-compliance that have resulted in substantial adverse financial consequences to non-compliant companies. Also, some of the Company's commercial partners, such as credit card companies, have imposed data security standards that the Company must meet. These standards continue to evolve. The Company will continue its efforts to meet its privacy and data security obligations; however, it is possible that certain new obligations or customer expectations may be difficult to meet and could require changes in the Company's operating processes and increase the Company's costs.
Additionally, the Company must manage the increasing threat of continually evolving cybersecurity risks. Our network, systems and storage applications, and those systems and applications maintained by our third-party commercial partners (such as credit card companies and international airline partners), may be subject to attempts to gain unauthorized access, breach, malfeasance or other system disruptions, including those involving criminal hackers, denial of service attacks, hacktivists, state-sponsored actors, corporate espionage, employee malfeasance and human or technological error. In some cases, it is difficult to anticipate or to detect immediately such incidents and the damage caused thereby. In addition, as attacks by cybercriminals become more sophisticated, frequent and intense, the costs of proactive defense measures have increased and may continue to increase. In addition, several large organizations recently have been affected by "ransomware" attacks, and these highly publicized events may embolden individuals or groups to target our systems or the third party systems on which we rely. Furthermore, the Company's remote work arrangements make it more vulnerable to targeted activity from cybercriminals and significantly increase the risk of cyberattacks or other security breaches. While we continually work to safeguard our internal network, systems and applications, including through risk assessments, system monitoring, cybersecurity and data protection security policies, processes and technologies and employee awareness and training, and require third-party security standards, there is no assurance that such actions will be sufficient to prevent cyberattacks or data breaches.
Any such cyberattacks or data breaches could result in significant costs, including monetary damages, operational impacts, including service interruptions and delays, and reputational harm. Furthermore, the loss, disclosure, misappropriation of or access to sensitive Company information, customers', employees' or business partners' information or the Company's failure to meet its privacy obligations could result in legal claims or proceedings, penalties and remediation costs. A significant data breach or the Company's failure to meet its obligations may adversely affect the Company's operations, reputation, relationships with our business partners, business, operating results and financial condition.
Disruptions to our regional network and United Express flights provided by third-party regional carriers could adversely affect our business, operating results and financial condition.
The Company has contractual relationships with various regional carriers to provide regional aircraft service branded as United Express. These regional operations are an extension of the Company's mainline network and complement the Company's operations by carrying traffic that connects to mainline service and allows flights to smaller cities that cannot be provided economically with mainline aircraft. The Company's business and operations are dependent on its regional flight network, with regional capacity accounting for approximately 14.6% of the Company's total capacity for the year ended December 31, 2020.
Although the Company has agreements with its regional carriers that include contractually agreed performance metrics, each regional carrier is a separately certificated commercial air carrier, and the Company does not control the operations of these carriers. A number of factors may impact the Company's regional network, including weather-related effects, seasonality and any significant declines in demand for air travel services, including as a result of the on-going COVID-19 pandemic.
In addition, the decrease in qualified pilots driven by changes to federal regulations has adversely impacted and could continue to affect the Company's regional flying. For example, the FAA's expansion of minimum pilot qualification standards, including a requirement that a pilot have at least 1,500 total flight hours, as well as the FAA's revised pilot flight and duty time requirements under Part 117 of the Federal Aviation Regulations, have contributed to a smaller supply of pilots available to regional carriers. The decrease in qualified pilots resulting from the regulations as well as factors including a decreased student pilot population and a shrinking U.S. military from which to hire qualified pilots, could adversely impact the Company's operations and financial condition, and could also require the Company to reduce regional carrier flying.
If, as a result of the COVID-19 pandemic, the pilot shortage or another significant disruption to our regional network, one or more of the regional carriers with which the Company has relationships is unable to perform its obligations over an
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extended period of time, there could be a material adverse effect on the Company's business, operating results and financial condition.
Our significant investments in other airlines, equipment manufacturers and other aviation industry participants, and the commercial relationships that we have with those entities, may not produce the returns or results we expect.
An important part of the Company's strategy to expand its global network has included making significant investments in other airlines, both domestically and in other parts of the world, as well as in other aviation industry participants, including producers of sustainable aviation fuel, manufacturers of electric and other new generation aircraft. The Company recently announced the formation of United Airlines Ventures ("UAV"), a corporate venture fund through which the Company intends to continue to invest in emerging companies that have the potential to influence the future of travel, concentrating on sustainability concepts that will complement United's goal of net zero emissions by 2050 as well as aerospace developments and innovative technologies.The Company has made investments in participants in various aspects of the aviation industry, including Archer Aviation Inc., Boom Technology Inc., Heart Aerospace, 1PointFive, Inc., Fulcrum BioEnergy, Inc., Journera, Inc. and Clear.
In addition to these investments, the Company has also invested in other airlines and expanded its commercial relationships with these carriers. For example, in January 2019, the Company completed the acquisition of a 49.9% interest in ManaAir LLC ("ManaAir"), which, as of immediately following the closing of that investment, owns 100% of the equity interests in ExpressJet Airlines, LLC ("ExpressJet"). The Company also has minority equity interests in CommutAir and Republic Airways Holdings Inc. See Note 9 to the financial statements included in Part II, Item 8 of the 2020 Form 10-K and Note 6 to the financial statements included in Part I, Item I of this report for additional information regarding the Company's investments in regional airlines. The Company also has significant investments in several Latin American airlines, including in Avianca Holdings, S.A. ("AVH") and BRW Aviation LLC ("BRW"), an affiliate of Synergy Aerospace Corporation and the majority shareholder of AVH, and in Azul Linhas Aéreas Brasileiras S.A. ("Azul"). In the future, the Company's regional and global business strategy could include entering into JBAs, commercial agreements and strategic alliances with other carriers, and possibly making loan transactions with, and non-controlling investments in, such carriers.
These transactions and relationships involve significant challenges and risks. Many of the companies in which the Company has invested are developing new and unproved technology. In addition, the Company faces competition in forming and maintaining relationships with other carriers, since there are a limited number of potential arrangements, and other airlines and industry participants are looking to enter into similar relationships. With regard to some of the airline investments, the Company is dependent on these other carriers for significant aspects of its network in the regions in which they operate. While the Company works closely with these carriers, each is a separately certificated commercial air carrier, and the Company does not have control over their operations, strategy, management or business methods. And not only are these airlines subject to a number of the same risks as the Company's business, which are described elsewhere in this Part II, Item 1A. Risk Factors, including the impact of the COVID-19 pandemic, competitive pressures on pricing, demand and capacity, changes in aircraft fuel pricing, and the impact of global and local political and economic conditions on operations and customer travel patterns, among others, they are also subject to their own distinct financial and operational risks.
As a result of these and other factors, the Company has not received, and may in the future not receive, satisfactory or expected returns on certain of its investments or repayment of invested or loaned funds. For example, we recorded a full credit loss allowance for the Company's $456 million term loan to BRW following BRW's default on such loan and the subsequent bankruptcy filing of BRW's subsidiary AVH, the parent of Aerovías del Continente Americano S.A. ("Avianca"), and the Company expects to pay $217 million to Kingsland Holdings Limited if, as expected, BRW defaults on the cooperation payment owed to Kingsland and guaranteed by the Company.In addition, the Company's $150 million senior secured convertible term loan to AVH, which was subsequently refinanced, or "rolled up", as a Tranche B loan in AVH's $2 billion debtor-in-possession financing, may not be repaid, and/or may be converted into new equity of AVH, if and when it emerges from bankruptcy. Finally, as the Company exercised its right to withdraw all aircraft from its capacity purchase agreement with ExpressJet, and, as of October 1, 2020 ExpressJet no longer provides regional capacity services to United, the Company's investment in ManaAir may not be recovered in full or at all. See Notes 8, 9, 11 and 13 to the financial statements included in Part II, Item 8 of the 2020 Form 10-K and Notes 6 and 7 to the financial statements included in Part I, Item I of this report for additional information regarding the Company's investments in AVH and Azul, its capacity purchase arrangements with ExpressJet and the Company's guarantee of the cooperation payment referenced above, respectively.
Further, the Company's investments, including its investments through UAV, may not generate the revenue or operational synergies the Company expects, and they may distract management focus from the Company's operations or other strategic options. The Company may also be subject to consequences from any illegal conduct of JBA partners, including for failure to comply with anti-corruption laws such as the U.S. Foreign Corrupt Practices Act. Furthermore, the Company's relationships with these entities may be subject to the laws and regulations of non-U.S. jurisdictions in which these entities are
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located or conduct business. In addition, any political or regulatory change in these jurisdictions that negatively impacts or prohibits the Company's arrangements with these entities could have an adverse effect on the Company's operating results or financial condition. Finally, the Company's reliance on other carriers in the regions in which they operate may negatively impact the Company's regional and global operations and results if those carriers continue to be impacted by the COVID-19 pandemic and other general business risks discussed above or perform below the Company's expectations or needs and are not able to effectively mitigate these impacts or restore performance levels.
Any one or more of these events could have a material adverse effect on the Company's operating results or financial condition.
The airline industry may undergo further change with respect to alliances and JBAs or due to consolidations, any of which could have a material adverse effect on the Company.
The Company faces, and may continue to face, strong competition from other carriers due to the modification of alliances and formation of new JBAs. Carriers may improve their competitive positions through airline alliances, slot swaps and/or JBAs. Certain types of airline JBAs further competition by allowing multiple airlines to coordinate routes, pool revenues and costs, and enjoy other mutual benefits, achieving many of the benefits of consolidation. Open Skies agreements, including the longstanding agreements between the United States and each of the EU, Canada, Japan, Korea, New Zealand, Australia, Colombia and Panama, as well as the more recent agreements between the United States and each of Mexico and Brazil, may also give rise to better integration opportunities among international carriers. Movement of airlines between current global airline alliances could reduce joint network coverage for members of such alliances while also creating opportunities for JBAs and bilateral alliances that did not exist before such realignment. Further airline and airline alliance consolidations or reorganizations could occur in the future. The Company routinely engages in analyses and discussions regarding its own strategic position, including current and potential alliances, asset acquisitions and divestitures and may have future discussions with other airlines regarding strategic activities. If other airlines participate in such activities, those airlines may significantly improve their cost structures or revenue generation capabilities, thereby potentially making them stronger competitors of the Company and potentially impairing the Company's ability to realize expected benefits from its own strategic relationships.
Orders for new aircraft typically must be placed years in advance of scheduled deliveries, and changes in the Company's network strategy over time or other factors outside of the Company's control may make aircraft on order less economic for the Company, result in costs related to modification or termination of aircraft orders or cause the Company to enter into orders for new aircraft on less favorable terms, and any inability to accept or integrate new aircraft into the Company's fleet as planned could increase costs or affect the Company's flight schedules.
The Company's orders for new aircraft are typically made years in advance of actual delivery of such aircraft, and the financial commitment required for purchases of new aircraft is substantial. As of June 30, 2021, the Company had firm commitments to purchase 553 new aircraft from The Boeing Company ("Boeing") and Airbus S.A.S. ("Airbus"), as well as related agreements with engine manufacturers, maintenance providers and others. As of June 30, 2021, the Company's commitments relating to the acquisition of aircraft and related spare engines, aircraft improvements and other related obligations aggregated to a total of approximately $35.3 billion.
Subsequent to the Company placing an order for new aircraft, the Company's network strategy may change. As a result, the Company's preference for a particular aircraft that it has ordered, often years in advance, may be decreased or eliminated. If the Company were to modify or terminate any of its existing aircraft order commitments, it may be responsible for material liabilities to its counterparties arising from any such modification. In particular, during the second quarter of 2021, we announced the firm orders of 200 Boeing 737 MAX aircraft and 70 Airbus A321neo aircraft, which was the largest order in the Company's history, as part of the Company's "United Next" strategy.If future market conditions are not consistent with our expectations for increased customer demand, resulting in a modification or termination of these orders, we could incur significant contractual liabilities, and our financial condition could be adversely impacted.
Additionally, the Company may have a need for additional aircraft that are not available under its existing orders. In such cases, the Company may seek to acquire aircraft from other sources, such as through lease arrangements, which may result in higher costs or less favorable terms, or through the purchase or lease of used aircraft. The Company may not be able to acquire such aircraft when needed on favorable terms or at all.Furthermore, if, for any reason, the Company is unable to accept deliveries of new aircraft or integrate such new aircraft into its fleet as planned, the Company may face higher financing and operating costs than planned, or be required to seek extensions of the terms for certain leased aircraft or otherwise delay the exit of other aircraft from its fleet.Such unanticipated extensions or delays may require the Company to operate existing aircraft beyond the point at which it is economically optimal to retire them, resulting in increased maintenance costs, or reductions to the Company's schedule, thereby reducing revenues.
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The imposition of new tariffs, or any increase in existing tariffs, on the importation of commercial aircraft that the Company orders may result in higher costs. For example, in October 2019, the United States imposed tariffs on certain imports from the EU, including a customs duty at an ad valorem rate of 10% on new commercial aircraft, which rate, in February 2020, was increased to 15%. These tariffs apply to certain new Airbus aircraft that we have on order. Additionally, in December 2020, the United States imposed tariffs on certain aircraft components from France and Germany. In June 2021, the United States and the EU reached an understanding in principle relating to commercial airlines to guide their cooperation with respect to their intent to suspend such tariffs for a period of five years. While the scope and rate of these tariffs are subject to change, if and to the extent these tariffs are imposed on us, they could increase the effective cost of, among other things, new Airbus aircraft and aircraft components.
A majority of the Company's aircraft and certain parts are sourced from single suppliers; therefore, the Company would be materially and adversely affected if it were unable to obtain timely deliveries, additional equipment or support from any of these suppliers.
The Company currently sources the majority of its aircraft and many related aircraft parts from Boeing. In addition, our aircraft suppliers are dependent on other suppliers for certain other aircraft parts. Therefore, if the Company is unable to acquire additional aircraft from Boeing, or if Boeing fails to make timely deliveries of aircraft (whether as a result of any failure or delay in obtaining regulatory approval or certification for new model aircraft, such as the 737 MAX 10 aircraft, which has not yet been certified, or manufacturing delays or otherwise) or to provide adequate support for its products, including with respect to the aircraft subject to firm orders under our "United Next" plan, the Company's operations could be materially and adversely affected. The Company is also dependent on a limited number of suppliers for aircraft engines and certain other aircraft parts and could, therefore, also be materially and adversely affected in the event of the unavailability of these engines and other parts.
Union disputes, employee strikes or slowdowns, and other labor-related disruptions could adversely affect the Company's operations and could result in increased costs that impair its financial performance.
United is a highly unionized company. As of June 30, 2021, the Company and its subsidiaries had approximately 84,400 employees, of whom approximately 85% were represented by various U.S. labor organizations. See Part I, Item 1. Business-Human Capital, of the 2020 Form 10-K for additional information on our represented employee groups and collective bargaining agreements.
There is a risk that unions or individual employees might pursue judicial or arbitral claims arising out of changes implemented as a result of the Company entering into collective bargaining agreements with its represented employee groups. There is also a possibility that employees or unions could engage in job actions such as slowdowns, work-to-rule campaigns, sick-outs or other actions designed to disrupt the Company's normal operations, in an attempt to pressure the Company in collective bargaining negotiations. Although the RLA makes such actions unlawful until the parties have been lawfully released to self-help, and the Company can seek injunctive relief against premature self-help, such actions can cause significant harm even if ultimately enjoined. Similarly, if the operations of our third-party regional carriers, ground handlers or other vendors are impacted by labor-related disruptions, our operations could be adversely affected. In addition, collective bargaining agreements with the Company's represented employee groups increase the Company's labor costs, which increase could be material.
Extended interruptions or disruptions in service at major airports where we operate could have a material adverse impact on our operations.
The airline industry is heavily dependent on business models that concentrate operations in major airports in the United States and throughout the world. An extended interruption or disruption at an airport where we have significant operations could have a material impact on our business, financial condition and results of operation.
We operate principally through our domestic hubs in Newark, Chicago O'Hare, Denver, Houston Bush, LAX, Guam, SFO and Washington Dulles. Substantially all of our flights either originate in or fly into one of these locations. A significant interruption or disruption in service at one of our hubs or other airports where we have a significant presence resulting from ATC delays, weather conditions, natural disasters, growth constraints, relations with third-party service providers, failure of computer systems, disruptions to government agencies or personnel (including as a result of government shutdowns), disruptions at airport facilities or other key facilities used by us to manage our operations, labor relations, power supplies, fuel supplies, terrorist activities, international hostilities or otherwise could result in the cancellation or delay of a significant portion of our flights and, as a result, could have a material impact on our business, operating results and financial condition. We have minimal control over the operation, quality or maintenance of these services or whether vendors will improve or continue to provide services that are essential to our business.
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The Company's operating results fluctuate due to seasonality and other factors associated with the airline industry, many of which are beyond the Company's control.
Due to greater demand for air travel during the spring and summer months, revenues in the airline industry in the second and third quarters of the year are generally stronger than revenues in the first and fourth quarters of the year, which are periods of lower travel demand. The Company's operating results generally reflect this seasonality, but have also been impacted by numerous other factors that are not necessarily seasonal, including, among others, extreme or severe weather, outbreaks of disease or pandemics, ATC congestion, geological events, political instability, terrorism, natural disasters, changes in the competitive environment due to industry consolidation, tax obligations, general economic conditions and other factors. As a result, the Company's quarterly operating results are not necessarily indicative of operating results for an entire year and historical operating results in a quarterly or annual period are not necessarily indicative of future operating results.
The Company may never realize the full value of its intangible assets or its long-lived assets causing it to record impairments that may negatively affect its financial condition and operating results.
In accordance with applicable accounting standards, the Company is required to test its indefinite-lived intangible assets for impairment on an annual basis, or more frequently where there is an indication of impairment. In addition, the Company is required to test certain of its other assets for impairment where there is any indication that an asset may be impaired.
The Company may be required to recognize losses in the future due to, among other factors, extreme fuel price volatility, tight credit markets, government regulatory changes, decline in the fair values of certain tangible or intangible assets, such as aircraft, route authorities, airport slots and frequent flyer database, unfavorable trends in historical or forecasted results of operations and cash flows and an uncertain economic environment, as well as other uncertainties. For example, in 2021, the Company recorded $59 million of impairments primarily related to 64 Embraer EMB 145LR aircraft and related engines that United is retiring from its regional aircraft fleet, and in 2020, the Company recorded impairment charges of $130 million for its China routes, primarily as a result of the COVID-19 pandemic and the Company's subsequent suspension of flights to China, $38 million for its right-of-use asset associated with an embedded aircraft lease under a CPA, primarily as a result of reduced cash flows from the COVID-19 pandemic, and $94 million related to certain of the Company's fleet of Boeing 757 aircraft, and $56 million with respect to various cancelled facility, aircraft induction and information technology capital projects as a result of the COVID-19 pandemic's impact on our operations. In addition, in 2019, the Company recorded impairment charges of $90 million associated with its Hong Kong routes, resulting in the full impairment of these assets. The Company can provide no assurance that a material impairment loss of tangible or intangible assets will not occur in a future period. The value of the Company's aircraft could be impacted in future periods by changes in supply and demand for these aircraft. Such changes in supply and demand for certain aircraft types could result from the grounding of aircraft. An impairment loss could have a material adverse effect on the Company's financial condition and operating results.
Any damage to our reputation or brand image could adversely affect our business or financial results.
We operate in a public-facing industry and maintaining a good reputation is critical to our business. The Company's reputation or brand image could be adversely impacted by any failure to maintain satisfactory practices for all of our operations and activities, any failure to achieve and/or make progress toward our environmental and sustainability goals or our diversity, equity and inclusion goals, public pressure from investors or policy groups to change our policies, customer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs, customer perceptions of our use of social media, or customer perceptions of statements made by us, our employees and executives, agents or other third parties. Damage to our reputation or brand image or loss of customer confidence in our services could adversely affect our business and financial results, as well as require additional resources to rebuild our reputation.
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, 2020, UAL reported consolidated U.S. federal net operating loss ("NOL") carryforwards of approximately $11.0 billion.
The Company's ability to use its NOL carryforwards and certain other tax attributes will depend on the amount of taxable income it generates in future periods. As a result, certain of the Company's NOL carryforwards and other tax attributes may expire before it can generate sufficient taxable income to use them in full.
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In addition, the Company's ability to use its NOL carryforwards and certain other tax attributes to offset future taxable income may be limited if it experiences an "ownership change" as defined in Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"). An ownership change generally occurs if certain stockholders increase their aggregate percentage ownership of a corporation's stock by more than 50 percentage points over their lowest percentage ownership at any time during the testing period, which is generally the three-year period preceding any potential ownership change.
In general, a corporation that experiences an ownership change will be subject to an annual limitation on its pre-ownership change NOLs and certain other tax attribute carryforwards equal to the value of the corporation's stock immediately before the ownership change, multiplied by the applicable long-term, tax-exempt rate posted by the IRS. Any unused annual limitation may, subject to certain limits, be carried over to later years, and the limitation may, under certain circumstances, be increased by built-in gains in the assets held by such corporation at the time of the ownership change. This limitation could cause the Company's U.S. federal income taxes to be greater, or to be paid earlier, than they otherwise would be, and could cause a portion of the Company's NOLs and certain other tax attributes to expire unused. Similar rules and limitations may apply for state income tax purposes.
For purposes of determining whether there has been an "ownership change," the change in ownership as a result of purchases by "5-percent shareholders" will be aggregated with certain changes in ownership that occurred over the three-year period ending on the date of such purchases. Potential future transactions involving the sale or issuance of UAL common stock may increase the possibility that the Company will experience a future ownership change under Section 382. Such transactions may include the exercise of warrants issued in connection with the CARES Act programs, the issuance of UAL common stock upon the conversion of any convertible debt that UAL may issue in the future, the repurchase of any debt with UAL common stock, any issuance of UAL common stock for cash, and the acquisition or disposition of any stock by a stockholder owning 5% or more of the outstanding shares of UAL common stock, or a combination of the foregoing. If we were to experience an "ownership change," it is possible that the Company's NOLs and certain other tax attribute carryforwards could expire before we would be able to use them to offset future income tax obligations.
On December 4, 2020, the board of directors of the Company adopted a tax benefits preservation plan (the "Plan") in order to preserve the Company's ability to use its NOLs and certain other tax attributes to reduce potential future income tax obligations. At the Company's annual meeting of stockholders held on May 26, 2021, the Company's stockholders approved the Plan. The Plan is designed to reduce the likelihood that the Company experiences an "ownership change" by deterring certain acquisitions of Company securities. There is no assurance, however, that the deterrent mechanism in the Plan will be effective, and such acquisitions may still occur. In addition, the Plan may adversely affect the marketability of UAL common stock by discouraging existing or potential investors from acquiring UAL common stock or additional shares of UAL common stock because any non-exempt third party that acquires 4.9% or more of the then-outstanding shares of UAL common stock would suffer substantial dilution of its ownership interest in the Company.
Risks Relating to Legal and Regulatory Compliance
The airline industry is subject to extensive government regulation, which imposes significant costs and may adversely impact our business, operating results and financial condition.
Airlines are subject to extensive regulatory and legal oversight. Compliance with U.S. and international regulations imposes significant costs and may have adverse effects on the Company. Laws, regulations, taxes and airport rates and charges, both domestically and internationally, have been proposed from time to time that could significantly increase the cost of airline operations or reduce airline revenue. The airline industry is heavily taxed, and additional taxation could negatively impact our business.
United provides air transportation under certificates of public convenience and necessity issued by the DOT. If the DOT altered, amended, modified, suspended or revoked these certificates, it could have a material adverse effect on the Company's business. The DOT also regulates consumer protection and, through its investigations or rulemaking authority (including, for example, any rulemakings or initiatives in response to the Executive Order on Promoting Competition in the American Economy issued by the President on July 9, 2021), could impose restrictions that materially impact the Company's business. The FAA regulates the safety of United's operations. United operates pursuant to an air carrier operating certificate issued by the FAA. The FAA's regulations include stringent pilot flight and duty time requirements under Part 117 of the Federal Aviation Regulations, as well as minimum qualifications for air carrier first officers. From time to time, the FAA also issues orders, airworthiness directives and other regulations relating to the maintenance and operation of aircraft that require material expenditures or operational restrictions by the Company. These FAA orders and directives have resulted in the temporary grounding of an entire aircraft type if the FAA identifies design, manufacturing, maintenance or other issues requiring immediate corrective action (including the FAA Emergency Airworthiness Directive grounding our Boeing 777 Pratt & Whitney powered aircraft). These FAA directives or requirements could have a material adverse effect on the Company.
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In 2018, the U.S. Congress approved a five-year reauthorization for the FAA, which encompasses significant aviation tax and policy-related issues. The law includes a range of policy changes related to airline customer service and aviation safety. Implementation of some items continues into the Biden Administration and, depending on how they are implemented, could impact our operations and costs. U.S. Congressional action in response to the COVID-19 pandemic has provided funding for U.S. airlines, in both grants and loans. The U.S. Congress has imposed limited conditions on airlines accepting funding, including workforce retention and minimum service requirements. With the change in control of the U.S. Congress, under the Biden Administration, any future funding or other pandemic relief could include additional requirements that could impact our operations and costs. Additionally, the U.S. Congress may consider legislation related to environmental issues or increases to the U.S. federal corporate income tax rate, as outlined in the Biden Administration's tax plan or otherwise, which could impact the Company and the airline industry.
The Company's operations may also be adversely impacted due to the existing antiquated ATC system utilized by the U.S. government and regulated by the FAA. During peak travel periods in certain markets, the current ATC system's inability to handle demand has led to short-term capacity constraints imposed by government agencies and resulted in delays and disruptions of air traffic. In addition, the current system will not be able to effectively handle projected future air traffic growth. The outdated technologies also cause the ATC to be less resilient in the event of a failure, causing flight cancellations and delays. Imposition of these ATC constraints on a long-term basis may have a material adverse effect on the Company's operations. Failure to update the ATC system in a timely manner and the substantial funding requirements of a modernized ATC system that may be imposed on air carriers may have an adverse impact on the Company's financial condition or operating results.
Access to landing and take-off rights, or "slots," at several major U.S. airports and many foreign airports served by the Company are, or recently have been, subject to government regulation. Certain of the Company's major hubs are among the most congested airports in the United States and have been or could be the subject of regulatory action that might limit the number of flights and/or increase costs of operations at certain times or throughout the day. The DOT (including FAA) may limit the Company's airport access by limiting the number of departure and arrival slots at high density traffic airports, which could affect the Company's ownership and transfer rights, and local airport authorities may have the ability to control access to certain facilities or the cost of access to their facilities, which could have an adverse effect on the Company's business. The DOT historically has taken actions with respect to airlines' slot holdings that airlines have challenged; if the DOT were to take actions that adversely affect the Company's slot holdings, the Company could incur substantial costs to preserve its slots or may lose slots. If slots are eliminated at an airport, or if the number of hours of operation governed by slots is reduced at an airport, the lack of controls on take-offs and landings could result in greater congestion both at the affected airport or in the regional airspace (e.g., the New York City metropolitan region airspace) and could significantly impact the Company's operations. In addition, as airports around the world become more congested, space, facility, and infrastructure constraints may prevent the Company from maintaining existing service and/or implementing new service in a commercially viable manner. Further, the Company's operating costs at airports, including the Company's major hubs, may increase significantly because of capital improvements at such airports that the Company may be required to fund, directly or indirectly. Such costs could be imposed by the relevant airport authority without the Company's approval and may have a material adverse effect on the Company's financial condition. Because of airport infrastructure updates and other factors, the Company has experienced increased space rental rates at various airports in its network. Further, the Company cannot control decisions by other airlines to reduce their capacity. When this occurs, certain fixed airport costs are allocated among fewer total flights, which can result in increased landing fees and other costs for the Company. In light of constraints on existing facilities, there is presently a significant amount of capital spending underway at major airports in the United States, including large projects underway at a number of airports where we have significant operations, such as Chicago O'Hare International Airport (ORD), Los Angeles International Airport (LAX), LaGuardia Airport (LGA) and Ronald Reagan Washington National Airport (DCA). This spending is expected to result in increased costs to airlines and the traveling public that use those facilities as the airports seek to recover their investments through increased rental, landing and other facility costs. In some circumstances, such costs could be imposed by the relevant airport authority without our approval. Accordingly, our operating costs are expected to increase significantly at many airports at which we operate, including a number of our hubs and gateways, as a result of capital spending projects currently underway and additional projects that we expect to commence over the next several years.
The ability of carriers to operate flights on international routes between the United States and other countries is highly regulated. Applicable arrangements between the United States and foreign governments may be amended from time to time, government policies with respect to airport operations may be revised, and the availability of appropriate slots or facilities may change. The Company currently operates a number of flights on international routes under government arrangements, regulations or policies that designate the number of carriers permitted to operate on such routes, the capacity of the carriers providing services on such routes, the airports at which carriers may operate international flights, or the number of carriers allowed access to particular airports. In addition, the pandemic has resulted in, and created the potential for, increased regulatory burdens in the U.S. and around the globe. These include but are not limited to closure of international borders to
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flights and/or passengers from specific countries, passenger and crew quarantine requirements, and other regulations promulgated to protect public health but that have a negative impact on travel and airline operations. Any limitations, additions or modifications to such arrangements, regulations or policies could have a material adverse effect on the Company's financial condition and operating results. Additionally, a change in law, regulation or policy for any of the Company's international routes, such as Open Skies, could have a material adverse impact on the Company's financial condition and operating results and could result in the impairment of material amounts of related tangible and intangible assets. In addition, competition from revenue-sharing JBAs and other alliance arrangements by and among other airlines could impair the value of the Company's business and assets on the Open Skies routes. The Company's plans to enter into or expand U.S. antitrust immunized alliances and JBAs on various international routes are subject to receipt of approvals from applicable U.S. federal authorities and obtaining other applicable foreign government clearances or satisfying the necessary applicable regulatory requirements. There can be no assurance that such approvals and clearances will be granted or will continue in effect upon further regulatory review or that changes in regulatory requirements or standards can be satisfied.
See Part I, Item 1. Business-Industry Regulation, of the 2020 Form 10-K for additional information on government regulation impacting the Company.
We are subject to many forms of environmental regulation and liability and risks associated with climate change, and may incur substantial costs as a result.
Many aspects of the Company's operations are subject to increasingly stringent federal, state, local and international laws protecting the environment, including those relating to emissions to the air, water discharges, safe drinking water, the use and management of hazardous materials and wastes, and noise emissions. Compliance with existing and future environmental laws and regulations can require significant expenditures and violations can lead to significant fines and penalties. In addition, from time to time we are identified as a responsible party for environmental investigation and remediation costs under applicable environmental laws due to the disposal of hazardous substances generated by our operations. We could also be subject to environmental liability claims from various parties, including airport authorities, related to our operations at our owned or leased premises or the off-site disposal of waste generated at our facilities.
We may incur substantial costs as a result of changes in weather patterns due to climate change. Increases in the frequency, severity or duration of severe weather events such as thunderstorms, hurricanes, flooding, typhoons, tornados and other severe weather events could result in increases in delays and cancellations, turbulence-related injuries and fuel consumption to avoid such weather, any of which could result in significant loss of revenue and higher costs. In addition, we could incur significant costs to improve the climate resiliency of our infrastructure and supply chain and otherwise prepare for, respond to, and mitigate the effects of climate change. We are not able to predict accurately the materiality of any potential losses or costs associated with the effects of climate change.
To mitigate climate change risks, CORSIA has been developed by ICAO, a UN specialized agency. CORSIA is intended to create a single global market-based measure to achieve carbon-neutral growth for international aviation after 2020 through airline purchases of carbon offset credits. The voluntary pilot and first phases of the program are expected to run from 2021 through 2023, and 2024 through 2026, respectively, with airlines having until January 2025 to cancel eligible emissions units to comply with their total offsetting requirements for the pilot phase. Certain CORSIA program aspects could potentially be affected by the results of the pilot phase of the program, and thus the impact of CORSIA cannot be fully predicted. However, CORSIA is expected to result in increased operating costs for airlines that operate internationally, including the Company.
In addition to CORSIA, in December 2020 the EPA adopted its own aircraft and aircraft engine GHG emissions standards, which are aligned with the 2017 ICAO airplane carbon dioxide emission standards. Other jurisdictions in which United operates have adopted or are considering GHG emissions reduction initiatives, which could impact various aspects of the Company's business. The final standards have been challenged by several states and environmental groups, and the Biden Administration has issued an executive order requiring a review of these final standards along with others issued by the prior presidential administration. On February 17, 2021, the United States Court of Appeals for the District of Columbia Circuit ordered to hold the challenge by the states and environmental groups in abeyance pending the EPA's review. The outcome of the legal challenge and administrative review cannot be predicted at this time. Furthermore, while the Company has voluntarily pledged to reduce 100% of our GHG emissions by 2050, the precise nature of future requirements and their applicability to the Company are difficult to predict, and the financial impact to the Company and the aviation industry would likely be adverse and could be significant if they vary significantly from the Company's own plans and strategy with respect to reducing GHG emissions.
See Part I, Item 1. Business-Industry Regulation-Environmental Regulation, of the 2020 Form 10-K for additional information on environmental regulation impacting the Company.
Risks Relating to Our Indebtedness
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The Company has a significant amount of financial leverage from fixed obligations and intends tomay seek material amounts of additional financial liquidity in the short-term, and insufficient liquidity may have a material adverse effect on the Company's financial condition and business.
The Company has a significant amount of financial leverage from fixed obligations, including aircraft lease and debt financings, leases of airport property, secured loan facilities and other facilities, and other material cash obligations. In addition, the Company has substantial noncancelable commitments for capital expenditures, including for the acquisition of new and used aircraft and related spare engines.
     In addition, in response to the travel restrictions, decreased demand and other effects the COVID-19 pandemic has had and is expected to have on the Company's business, the Company currently intends to continue to seek material amounts of additional financial liquidity in the short-term, which may include the proposed drawing of loans under the Loan Program of the CARES Act, the issuance of additional unsecured or secured debt securities, equity securities and equity-linked securities, the sale of assets as well as additional bilateral and syndicated secured and/or unsecured credit facilities, among other items.
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There can be no assurance as to the timing of any such incurrence or issuance, which may be in the near term, or that any such additional financing will be completed on favorable terms, or at all. As of June 30, 2020,2021, we had total long-term debt of $18.8$34.2 billion and $2.0$1.75 billion available for borrowing under our revolving credit facility, $1.0 billion of which was subsequently drawn on July 2, 2020. We also issued $6.8 billion in debt in connection with the MileagePlus Financing on July 2, 2020.We expect to receive an additional approximately $4.5 billion under the Loan Program under the CARES Act.facility.
The Company's substantial level of indebtedness, the Company's non-investment grade credit ratings and the availability of Company assets as collateral for loans or other indebtedness, which available collateral would behas been reduced as a result of any CARES Act Loan Program borrowingsthe financings in April 2021 secured by liens on certain international route authorities and other future liquidity-raising transactions,related airport take-off and landing slots and gate leaseholds, may make it difficult for the Company to raise additional capital if needed to meet its liquidity needs on acceptable terms, or at all. Furthermore, the documents relating to the MileagePlus Financing limit our ability to conduct certain types of financings until mid-August.
Although the Company's cash flows from operations and its available capital, including the proceeds from financing transactions, have been sufficient to meet its obligations and commitments to date, the Company's liquidity has been, and may in the future be, negatively affected by the risk factors discussed elsewhere in the 2019 Form 10-K, as updated by this report,Part II, Item 1A. Risk Factors, including risks related to future results arising from the COVID-19 pandemic. If the Company's liquidity is materially diminished, the Company's cash flow available for general corporate purposes may be materially and adversely affected. In particular, with respect to the MileagePlus Financing,$6.8 billion of senior secured notes and a secured term loan facility (the "MileagePlus Financing") secured by substantially all of the assets of Mileage Plus Holdings, LLC, a direct wholly-owned subsidiary of United ("MPH"), and Mileage Plus Intellectual Property Assets, Ltd., an indirect wholly-owned subsidiary of MPH ("MIPA"), the cash flows generated by the MileagePlus business are required to first satisfy interest and principal due thereunder. Therefore, the cash generated by the MileagePlus program is not fully available for our operations or to satisfy our other indebtedness obligations for the seven-year term of the MileagePlus Financing debt. This limitation on our cash flows could have a material adverse effect on our operations and flexibility.
A material reduction in the Company's liquidity could also result in the Company not being able to timely pay its leases and debts or comply with material provisions of its contractual obligations, including covenants under its financing and credit card processing agreements. Moreover, as a result of the Company's recently-completed financing activities in response to the COVID-19 pandemic, the number of financings with respect to which such covenants and provisions apply has increased, thereby subjecting the Company to more substantial risk of default, cross-default and cross-acceleration in the event of breach, and additional covenants and provisions could become binding on the Company asin the event it continues to seek additional liquidity. In addition, several of the Company's debt agreements contain covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness. The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of the Company's credit card processing agreements, the financial institutions in certain circumstances have the right to require that the Company maintain a reserve equal to a portion (or potentially all) of advance ticket sales that have been processed by that financial institution, but for which the Company has not yet provided the air transportation. Such financial institutions may require cash or other collateral reserves to be established or withholding of payments related to receivables to be collected, including if the Company does not maintain certain minimum levels of unrestricted cash, cash equivalents and short-term investments. In light of the effect COVID-19 is having on demand and, in turn, capacity, the Company has seen an increase in demand from consumers for refunds on their tickets, and we anticipate some level of increased demand for refunds on tickets will continue to be the case for the near future. Refunds lower our liquidity and put us at risk of triggering liquidity covenants in these processing agreements and, in doing so, could force us to post cash collateral with the credit card companies for advance ticket sales. The Company also maintains certain insurance- and surety-related agreements under which counterparties have required, and may require, additional collateral.
In addition to the foregoing, the degree to which we are leveraged could have important consequences to holders of our securities, including the following:
•we must dedicate a substantial portion of cash flow from operations to the payment of principal and interest on applicable indebtedness, which, in turn, reduces funds available for operations and capital expenditures;
•our flexibility in planning for, or reacting to, changes in the markets in which we compete may be limited;
•we may be at a competitive disadvantage relative to our competitors with less indebtedness;
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•we are rendered more vulnerable to general adverse economic and industry conditions;
•we are exposed to increased interest rate risk given that a portion of our indebtedness obligations are at variable interest rates; and
•our credit ratings may be reduced and our debt and equity securities may significantly decrease in value.
Finally, as of June 30, 2020,2021, the Company had $7.6$13.2 billion in variable rate indebtedness, all or a portion of which uses London interbank offered rates ("LIBOR") as a benchmark for establishing applicable rates. On July 2, 2020, this amount was increased
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by an additional $3.0 billion by the MileagePlus Financing. As most recently announced in July 2017,November 30, 2020, LIBOR is expected to be phased out bystarting on January 1, 2022 for the end of 2021.one-week and two-month USD LIBOR settings and starting on July 1, 2023 for the remaining USD LIBOR settings. Although many of our LIBOR-based obligations provide for alternative methods of calculating the interest rate payable if LIBOR is not reported, the extent and manner of any future changes with respect to methods of calculating LIBOR or replacing LIBOR with another benchmark are unknown and impossible to predict at this time and, as such, may result in interest rates that are materially higher than current interest rates. If interest rates applicable to the Company's variable interest indebtedness increase, the Company's interest expense will also increase, which could make it difficult for the Company to make interest payments and fund other fixed costs and, in turn, adversely impact our cash flow available for general corporate purposes.
See Part I, Item 2., Management's Discussion and Analysis of Financial Condition and Results of Operations, of this report for additional information regarding the Company's liquidity as of June 30, 2020.2021.
If we are not able to comply with the covenants in the MileagePlus Financing agreements, our lenders could accelerate the MileagePlus indebtedness, foreclose upon the collateral securing the MileagePlus indebtedness or exercise other remedies, which would have a material adverse effect on our business, results of operations and financial condition.
The covenants in the agreements governing the MileagePlus Financing contain a number of provisions that will limit our ability to modify aspects of the MileagePlus program if such modifications would be reasonably expected to have a material adverse effect on the MileagePlus program or on our ability to pay the obligations under the MileagePlus Financing agreements. Moreover, the terms of such agreements also place certain restrictions on our establishing or owning another mileage or loyalty program and our ability to make material modifications to our agreements with certain MileagePlus partners. Furthermore, the MileagePlus Financing may also negatively affect certain material business relationships, and if any such relationship were to be materially impaired and/or terminated, we could experience a material adverse effect on our business, results of operations and financial condition.
The agreements governing the MileagePlus Financing restrict our ability to terminate or modify the intercompany agreements governing the relationship between United and the MileagePlus program, including the agreement governing the rate that United must pay MPH for the purchase of miles and United's obligation to make certain seat inventory available to MPH for redemption. Such restrictions are in addition to restrictions on the ability of the obligors under the MileagePlus indebtedness to make restricted payments, incur additional indebtedness, dispose of, create or incur certain liens on, or transfer or convey, the collateral securing the MileagePlus indebtedness, enter into certain transactions with affiliates, merge, consolidate, or sell assets, or designate certain subsidiaries as unrestricted. Complying with these covenants may restrict our ability to make material changes to the operation of the MPH business and may limit our ability to take advantage of business opportunities that may be in our long-term interest. We may also take actions, or omit to take actions, to comply with such covenants that could have a material adverse effect on our business and operations.
Our failure to comply with any of these covenants or restrictions could result in a default under the agreements governing the MileagePlus Financing, which could lead to an acceleration of the debt under such instruments and, in some cases, the acceleration of debt under other instruments that contain cross-default or cross-acceleration provisions, each of which could have a material adverse effect on us. In the case of an event of default under the agreements governing the MileagePlus Financing agreements, or a cross-default or cross-acceleration under our other indebtedness, we may not have sufficient funds available to make the required payments. If we are unable to repay amounts owed under the agreements governing the MileagePlus Financing, the lenders or noteholders thereunder may choose to exercise their remedies in respect of the collateral securing such indebtedness, including foreclosing upon the MileagePlus collateral, in which case we would lose the right to operate the MileagePlus program thereafter. The exercise of such remedies, especially the loss of the MileagePlus program, would have a material adverse effect on our business, results of operations and financial condition.
In connection with the MileagePlus Financing, we were required to contribute certain assets, including certain MileagePlus intellectual property, including brands and member data, to Mileage Plus Intellectual Property Assets, Ltd., an indirect wholly-owned subsidiary of MPH structured to be bankruptcy remote that serves as a co-issuer of the MileagePlus Financing indebtedness, the assets of which subsidiary are collateral for such indebtedness. United and MPH will have the right to use the contributed intellectual property pursuant to a license agreement with MIPA. Such license agreement will be
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terminated, and our right to use such intellectual property will cease, upon specified termination events, including, but not limited to, our failure to assume the license agreement and various related intercompany agreements in a restructuring process. The termination of the license agreement would be an event of default under the agreements governing the MileagePlus Financing and in certain circumstances would trigger a liquidated damages payment in an amount that is several multiples of the principal amount of the MileagePlus Financing debt. Thus, the terms of the MileagePlus Financing limit our flexibility to manage our capital structure going forward, and as a result, in the future we may take actions to ensure that the MileagePlus
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Financing debt is satisfied or that the lenders' remedies under such debt are not exercised, potentially to the detriment of our other creditors.
The Company'sAgreements governing our other debt include financial and other covenants. Failure to comply with these covenants could result in events of default.
In addition to the covenants in the MileagePlus Financing agreements discussed above, our other financing agreements include various financial and other covenants. Certain of these covenants require UAL or United, as applicable, to maintain minimum liquidity and/or minimum collateral coverage ratios. UAL's or United's ability to use its net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposescomply with these covenants may be significantly limitedaffected by events beyond its control, including the overall industry revenue environment, the level of fuel costs and the appraised value of the collateral. In addition, our financing agreements contain other negative covenants customary for such financings. These covenants are subject to important exceptions and qualifications. If we fail to comply with these covenants and are unable to remedy or obtain a waiver or amendment, an event of default would result.
If an event of default were to occur, the lenders could, among other things, declare outstanding amounts immediately due and payable. In addition, an event of default or declaration of acceleration under one financing agreement could also result in an event of default under other of our financing agreements due to various circumstances,cross-default and cross-acceleration provisions. The acceleration of significant amounts of debt could require us to renegotiate, repay or refinance the obligations under our financing arrangements.
General Risk Factors
If we experience changes in, or are unable to retain, our senior management team or other key employees, our operating results could be adversely affected.
Much of our future success depends on the continued availability of skilled personnel with industry experience and knowledge, including certain possible future transactions involving the sale or issuance of UAL common stock,our senior management team and other key employees. If we are unable to attract and retain talented, highly qualified senior management and other key employees, or if taxable income does not reach sufficient levels.
Aswe are unable to effectively provide for the succession of June 30, 2020, UAL reported consolidated federal net operating loss ("NOL") carryforwards of approximately $6 billion.
The Company's ability to use its NOL carryforwards to offset future taxable incomesenior management, our business may be limited if it experiences an "ownership change" as defined in Section 382 ("Section 382") of the Internal Revenue Code of 1986, as amended (the "Code"). An ownership change generally occurs if certain stockholders increase their aggregate percentage ownership of a corporation's stock by more than 50 percentage points over their lowest percentage ownership at any time during the testing period, which is generally the three-year period preceding any potential ownership change.adversely affected.
There is no assurance that the Company will not experience aCurrent or future ownership change under Section 382 that may significantly limit its abilitylitigation and regulatory actions, or failure to use its NOL carryforwards. Potential future transactions involving the sale or issuance of UAL common stock, including the exercise of warrants issued in connectioncomply with the CARES Act programs, conversion options under the terms of any convertible debtsettlement, order or arrangement relating to these actions, could have a material adverse impact on the Company.
From time to time, we are subject to litigation and other legal and regulatory proceedings relating to our business or investigations or other actions by governmental agencies, including as described in Part I, Item 3, Legal Proceedings, of the 2020 Form 10-K. No assurances can be given that UALthe results of these or new matters will be favorable to us. An adverse resolution of lawsuits, arbitrations, investigations or other proceedings or actions could have a material adverse effect on our financial condition and operating results, including as a result of non-monetary remedies, and could also result in adverse publicity. Defending ourselves in these matters may issuebe time-consuming, expensive and disruptive to normal business operations and may result in significant expense and a diversion of management's time and attention from the operation of our business, which could impede our ability to achieve our business objectives. Additionally, any amount that we may be required to pay to satisfy a judgment, settlement, fine or penalty may not be covered by insurance. If we fail to comply with the terms contained in any settlement, order or agreement with a governmental authority relating to these matters, we could be subject to criminal or civil penalties, which could have a material adverse impact on the Company. Under our charter and certain indemnification agreements that we have entered into (and may in the future the repurchase of any debtenter into) with UAL common stock, any issuance of UAL common stock for cash,our officers, directors and the acquisition or disposition of any stock by a stockholder owning 5% or more of UAL common stock, or a combination of such transactions, may increase the possibility that the Company will experience a future ownership change under Section 382.
Under Section 382, a future ownership change would subject the Companycertain third parties, we could be required to additional annual limitations that applyindemnify and advance expenses to the amount of pre-ownership change NOLs that may be used to offset post-ownership change taxable income. This limitation is generally determined by multiplying the value of a corporation's stock immediately before the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may, subject to certain limits, be carried over to later years, and the limitation may, under certain circumstances, be increased by built-in gains in the assets held by such corporation at the time of the ownership change. This limitation could cause the Company's U.S. federal income taxes to be greater, or to be paid earlier, than they otherwise would be, and could cause a portion of the Company's NOLs to expire unused. Similar rules and limitations may apply for state income tax purposes. The Company's ability to use its NOL carryforwards will also depend on the amount of taxable income it generates in future periods. As a result, certain of the Company's NOL carryforwards may expire before it can generate sufficient taxable income to use them in full.connection with their involvement in certain actions, suits, investigations and other proceedings. There can be no assurance that any of these payments will not be material.
COVID-19 hasIncreases in insurance costs or inadequate insurance coverage may materially disrupted our strategic operating plans in the near-term, and there are risks toadversely impact our business, operating results and financial condition associated with executing our strategic operating plans in the long-term.condition.
COVID-19 has materially disrupted our strategic operating plans in the near-term, and there are risksThe Company could be exposed to our business, operating results and financial condition associated with executing our strategic operating plans in the long-term. In recent years, we have announced several strategic operating plans, including several revenue-generating initiatives and planssignificant liability or loss if its property and/or operations were to optimize our revenue, such as our plans to add capacity, including international expansion and newbe affected by a natural catastrophe, aircraft accident or increased service to mid-size airports, initiatives and plans to optimize and control our costs and opportunities to enhance our segmentation and improve the customer experience at all points in air travel. In developing our strategic operating plans, we make certain assumptions,other event. The Company maintains insurance policies, including, but not limited to, those relatedterrorism, aviation hull and liability, workers' compensation and property and business interruption insurance, but we are not fully insured against all potential hazards and risks incident to customer demand, competition, market consolidation,our business. If the availabilityCompany is unable to obtain sufficient
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insurance with acceptable terms, the costs of aircraft andsuch insurance increase materially, or if the global economy. Actual economic, market and other conditions have been and may continuecoverage obtained is unable to be different from our assumptions. For example, in 2019, our capacity growth was lower than plannedpay or is insufficient relative to actual liability or losses that the Company experiences, whether due to the grounding of Boeing 737 MAX aircraft, among other factors, which adversely impactedinsurance market conditions, policy limitations and exclusions or otherwise, our ability to execute our strategic operating plans. In 2020, demand has been, and is expected to continue to be, significantly impacted by COVID-19, which has materially disrupted the timely execution of our strategic operating plans, including plans to add capacity in 2020. If we do not successfully execute or adjust our strategic operating plans in the long-term, or if actual results continue to vary significantly from our prior assumptions or vary significantly from our future assumptions, our business,operations, operating results and financial condition could be materially and adversely impacted.
The mandatory grounding of the Boeing 737 MAX aircraft may have a material adverse effect on our business, operating results and financial condition.
On March 13, 2019, the Federal Aviation Administration (the "FAA") issued an emergency order prohibiting the operation of Boeing 737 MAX series aircraft by U.S. certificated operators (the "FAA Order"). As a result, the Company grounded all 14 Boeing 737 MAX 9 aircraft in its fleet, and Boeing also suspended deliveries of new Boeing 737 MAX series
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aircraft. The Company does not know whether, on what conditions or when the MAX grounding will end. The long-term operational and financial impact of this grounding is uncertain and could negatively affect the Company based on a number of factors, including, among others, the period of time the aircraft are unavailable, the availability of replacement aircraft, to the extent needed, and the circumstances of any reintroduction of the grounded aircraft to service.
In 2019, the grounding affected the delivery of 16 Boeing 737 MAX aircraft that were scheduled for delivery and were not delivered, and it is also expected to affect the timing of future Boeing 737 MAX aircraft deliveries, including the Boeing 737 MAX aircraft that the Company planned to take delivery in 2020. The extent of the delay of future deliveries is expected to be impacted by the length of time the FAA Order remains in place, Boeing's production rate and the pace at which Boeing can deliver aircraft following the lifting of the FAA Order, among other factors, and these factors have been and could continue to be significantly impacted by the COVID-19 pandemic.
In response to the grounding, the Company has made adjustments to its flight schedule and operations, including substituting replacement aircraft on routes originally intended to be flown by Boeing 737 MAX aircraft. In 2019, the grounding impacted the Company's ability to implement its strategic growth strategy, reducing the Company's scheduled capacity from its planned capacity, and resulted in increased costs as well as lower operating revenue. The Company had discussions with Boeing regarding compensation from Boeing for the Company's financial damages related to the grounding of the airline's Boeing 737 MAX aircraft, and in March 2020, the Company entered into a confidential settlement with Boeing with respect to compensation for financial damages incurred in 2019. The settlement agreement was amended and restated in June 2020 to provide for the settlement of additional items related to aircraft delivery and to update the scheduled delivery for substantially all undelivered Boeing 737 MAX aircraft.
Disruptions to our regional network and United Express flights provided by third-party regional carriers could adversely affect our business, operating results and financial condition.
The Company has contractual relationships with various regional carriers to provide regional aircraft service branded as United Express. These regional operations are an extension of the Company's mainline network and complement the Company's operations by carrying traffic that connects to mainline service and allows flights to smaller cities that cannot be provided economically with mainline aircraft. The Company's business and operations are dependent on its regional flight network, with regional capacity accounting for approximately 11% of the Company's total capacity for the year ended December 31, 2019.
Although the Company has agreements with its regional carriers that include contractually agreed performance metrics, each regional carrier is a separately certificated commercial air carrier, and the Company does not control the operations of these carriers. A number of factors may impact the Company's regional network, including weather-related effects and seasonality. In addition, the decrease in qualified pilots driven by changes to federal regulations has adversely impacted and could continue to affect the Company's regional flying. For example, the FAA's expansion of minimum pilot qualification standards, including a requirement that a pilot have at least 1,500 total flight hours, as well as the FAA's revised pilot flight and duty time requirements under Part 117 of the Federal Aviation Regulations, have contributed to a smaller supply of pilots available to regional carriers. The decrease in qualified pilots resulting from the regulations as well as factors including a decreased student pilot population and a shrinking U.S. military from which to hire qualified pilots, could adversely impact the Company's operations and financial condition, and could also require the Company to reduce regional carrier flying. 
The significant decline in demand for air travel services resulting from the COVID-19 pandemic has also materially impacted demand for regional carrier services and, as a result, the Company's utilization of its regional network is significantly reduced and is expected to remain so for the foreseeable future. We expect the disruption to services resulting from the COVID-19 pandemic to continue to adversely affect our regional carriers, some of whom may declare bankruptcy or otherwise cease to operate, and we may also incur damages to our regional carriers under our agreements with them.  If, as a result of the COVID-19 pandemic or another significant disruption to our regional network, one or more of the regional carriers with which the Company has relationships is unable to perform its obligations over an extended period of time, there could be a material adverse effect on the Company's business, operating results and financial condition.
Our significant investments in other airlines, including in other parts of the world, and the commercial relationships that we have with those carriers may not produce the returns or results we expect.
An important part of our strategy to expand our global network includes making significant investments in airlines both domestically and in other parts of the world and expanding our commercial relationships with these carriers. For example, in January 2019, we completed the acquisition of a 49.9% interest in ManaAir LLC, which, as of immediately following the closing of that investment, owns 100% of the equity interests in ExpressJet Airlines LLC, a domestic regional airline. We also have minority equity interests in CommutAir and Republic Airways Holdings Inc. See Note 9 to the financial statements included in Part II, Item 8 of the Company's 2019 Form 10-K and Note 9 to the financial statements included in Part I, Item 1
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of this report for additional information regarding our investments in regional airlines. We also have significant investments in Latin American airlines, including significant investments in Avianca Holdings, S.A. ("AVH") and BRW Aviation LLC ("BRW"), an affiliate of Synergy Aerospace Corporation and the majority shareholder of AVH, and an equity investment in Azul Linhas Aéreas Brasileiras S.A. ("Azul"). In the future, our regional and global business strategy could include entering into joint business arrangements ("JBAs"), commercial agreements and strategic alliances with other carriers, and possibly making loan transactions with, and non-controlling investments in, such carriers.
These transactions and relationships involve significant challenges and risks, and we face competition in forming and maintaining these relationships, since there are a limited number of potential arrangements and other airlines are looking to enter into similar relationships. We are dependent on these other carriers for significant aspects of our network in the regions in which they operate. While we work closely with these carriers, each is a separately certificated commercial air carrier, and we do not have control over their operations, strategy, management or business methods. And not only are these airlines subject to a number of the same risks as our business, which are described by the risk factors discussed in the Company's 2019 Form 10-K, as updated by this report, including the impact of the COVID-19 pandemic, competitive pressures on pricing, demand and capacity, changes in aircraft fuel pricing, and the impact of global and local political and economic conditions on operations and customer travel patterns, among others, they are also subject to their own distinct financial and operational risks.
As a result of these and other factors, we may not realize satisfactory returns on our investments, and we may not receive repayment of any invested or loaned funds. Further, these investments may not generate the revenue or operational synergies we expect, and they may distract management focus from our operations or other strategic options. Finally, our reliance on these other carriers in the regions in which they operate may negatively impact our regional and global operations and results if those carriers continue to be impacted by the COVID-19 pandemic and other general business risks discussed above or perform below our expectations or needs and are not able to effectively mitigate these impacts or restore performance levels. Any one or more of these events could have a material adverse effect on our operating results or financial condition.  See Note 8 and Note 9 to the financial statements included in Part II, Item 8 of the Company's 2019 Form 10-K and Notes 7 and 8 to the financial statements included in Part I, Item 1 of this report for additional information regarding our investments in AVH and Azul, respectively. See also the additional risks with respect to our investment in AVH described in this report.
We may also be subject to consequences from any illegal conduct of JBA partners, including for failure to comply with anti-corruption laws such as the U.S. Foreign Corrupt Practices Act. Furthermore, our relationships with these carriers may be subject to the laws and regulations of non-U.S. jurisdictions in which these carriers are located or conduct business. In addition, any political or regulatory change in these jurisdictions that negatively impacts or prohibits our arrangements with these carriers could have an adverse effect on our operating results or financial condition. To the extent that the operations of any of these carriers are disrupted over an extended period of time (including as a result of the COVID-19 pandemic) or their actions subject us to the consequences of failure to comply with laws and regulations, our operating results may be adversely affected.
Our significant investments in AVH and its affiliates, and the commercial relationships that we have with Avianca may not produce the returns or results we expect.
In November 2018, as part of our global network strategy, United entered into a revenue-sharing joint business arrangement ("JBA") with Aerovías del Continente Americano S.A. ("Avianca"), a subsidiary of Avianca Holdings, S.A. ("AVH"), Copa Airlines and several of their respective affiliates, subject to regulatory approval. Concurrently with this transaction, United, as lender, entered into a Term Loan Agreement (the "BRW Term Loan Agreement") with, among others, BRW Aviation Holding LLC ("BRW Holding") and BRW Aviation LLC ("BRW"), as guarantor and borrower, respectively. Pursuant to the BRW Term Loan Agreement, United provided to BRW a $456 million term loan (the "BRW Term Loan"), secured by a pledge of BRW's equity, as well as BRW's 516 million common shares of AVH (which are eligible to be converted into the same number of preferred shares, which may be deposited with the depositary for AVH's American Depositary Receipts ("ADRs"), the class of AVH securities that trades on the New York Stock Exchange (the "NYSE"), in exchange for 64.5 million ADRs) (such shares and equity, collectively, the "BRW Loan Collateral"). In connection with funding the BRW Term Loan Agreement, the Company entered into an agreement with Kingsland Holdings Limited, AVH's largest minority shareholder ("Kingsland"), pursuant to which United granted to Kingsland a right to put its AVH common shares to United at market price on the fifth anniversary of the BRW Term Loan Agreement or upon certain sales of AVH common shares owned by BRW, including upon a foreclosure of United's security interest or any completed liquidation or dissolution of AVH, and also guaranteed BRW's obligation to pay Kingsland the excess, if any, of $12 per ADR on the NYSE and such market price of AVH common shares on the fifth anniversary, or upon any such sale, as applicable (the "Cooperation Payment"), for an aggregate maximum possible combined put payment and guarantee amount of $217 million. See Notes 7 and 9 to the financial statements included in Part I, Item 1 of this report for additional information regarding our obligations to Kingsland and their interrelationship with the BRW Term Loan Agreement. 
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     BRW is currently in default under the BRW Term Loan Agreement. In order to protect the value of its collateral, on May 24, 2019, United began to exercise certain remedies available to it under the terms of the BRW Term Loan Agreement and related documents. In connection with the delivery by United of a notice of default to BRW, Kingsland, was granted, in accordance with the agreements related to the BRW Term Loan Agreement, authority to manage BRW, which remains the majority shareholder of AVH. After a hearing on September 26, 2019, a New York state court granted Kingsland summary judgment authorizing it to foreclose on the BRW Loan Collateral under the BRW Term Loan Agreement. Kingsland then continued with the foreclosure process, which was expected to result in a judicially supervised sale of the BRW Loan Collateral. The New York state court also granted Kingsland's motion for a preliminary injunction that, among other things, enjoins BRW Holding from interfering with Kingsland's ability to exercise voting and other rights in certain equity interests in BRW. These rulings are intermediate steps in the judicial foreclosure process in New York and are subject to appeal.
     The judicial foreclosure process is subject to significant uncertainty given the filing by AVH and certain of its affiliates of voluntary reorganization proceedings under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York on May 10, 2020 (as described in more detail below, the "AVH Reorganization Proceedings"). In light of the AVH Reorganization Proceedings, the New York state court judge presiding over the foreclosure proceedings agreed to stay those proceedings until later this year. The repayment of the BRW Term Loan is dependent on this judicial foreclosure process and the value of the BRW Loan Collateral, if any, during or upon the conclusion of the AVH Reorganization Proceedings, and there is no assurance that a judicial foreclosure sale will be completed, or, if completed, will result in the full satisfaction of all of the obligations under the BRW Term Loan, including the obligation to repay United for any payment made in respect of our guarantee of the Cooperation Payment. In that regard, based on United's assessment of AVH's financial uncertainty and the fact that Avianca had ceased operations as a consequence of the COVID-19 pandemic, during the first quarter of 2020, the Company recorded a $697 million expected credit loss allowance for the BRW Term Loan and the Cooperation Payment. Even if a foreclosure sale of the BRW Loan Collateral were to proceed, the amount we receive from such a foreclosure sale may be inadequate to fully pay the amounts owed to us by BRW (including in respect of any payment we make in respect of the Cooperation Payment, if any) and our costs incurred to foreclose, repossess and sell the collateral. In addition, our ability to enforce a deficiency judgment against BRW or BRW Holding in the event that the proceeds from the sale of the BRW Loan Collateral in the judicial foreclosure are insufficient to repay the full amount of the BRW Term Loan may be limited. Any of these circumstances may lead to a loss or delay in the repayment of the BRW Term Loan. In addition, depending on the impact of the AVH Reorganization Proceedings on the equity interests of AVH, the value of the BRW Loan Collateral could be significantly and adversely affected, or the BRW Loan Collateral could be eliminated entirely, and United may not be able to recover any amounts owed to us by BRW (including in respect of any payment we make in respect of the Cooperation Payment, if any).
     In November 2019, United entered into a senior secured convertible term loan agreement (the "AVH Convertible Loan Agreement") with, among others, AVH, as borrower, for the provision by the lenders thereunder (including United) to AVH of convertible term loans for general corporate purposes. In December 2019, United provided such a convertible term loan to AVH under the AVH Convertible Loan Agreement in the aggregate amount of $150 million (the "AVH Convertible Loan"). See Notes 7 and 9 to the financial statements included in Part I, Item 1 of this report for additional information regarding our investments in AVH and its affiliates and our guarantee of the Cooperation Payment, respectively.
Upon the commencement of the AVH Reorganization Proceedings, an automatic stay was imposed that prohibits us from attempting to collect pre-bankruptcy debts from AVH or its properties, including repayment of the AVH Convertible Loan, and any other claims we may have against AVH or its affiliates unless we obtain relief from the automatic stay from the bankruptcy court. The AVH Convertible Loan is secured by a pledge of equity interests in certain of AVH's major subsidiaries, including LifeMiles, Ltd., the indirect subsidiary of AVH that owns and operates the LifeMiles frequent flier program and did not file for bankruptcy protection ("LifeMiles"), and, until released, certain Colombian Peso-denominated credit card receivables owing to Avianca, a guarantor under the AVH Convertible Loan Agreement. However, the amount of the claim with respect to the AVH Convertible Loan will be determined to be secured only to the extent of the value of the underlying collateral securing our claim and there is no assurance that the AVH Convertible Loan will be repaid in full. The duration of the AVH Reorganization Proceedings is difficult to predict, and United's recovery on its claims, including possibly its secured claim on account of the AVH Convertible Loan, may be adversely affected by delays while a plan of reorganization is being negotiated, approved by parties in interest and confirmed by the bankruptcy court until it ultimately becomes effective.
These transactions and relationships involve significant challenges and risks, particularly given the AVH Reorganization Proceedings, the impact of the COVID-19 pandemic and the judicial foreclosure process to which the repayment of the BRW Term Loan is subject. Furthermore, while we have worked closely with Avianca in connection with the JBA, and have supported AVH by providing capital in the form of the AVH Convertible Loan, Avianca is a separately certificated commercial air carrier, and we do not have control over its or AVH's operations, strategy, management or business methods. Avianca is also subject to a number of the same risks as our business, which are described in the Company's 2019 Form 10-K, as updated by this report, including the impact of the COVID-19 pandemic, competitive pressures on pricing,
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demand and capacity, changes in aircraft fuel pricing, and the impact of global and local political and economic conditions on operations and customer travel patterns, among others, as well as to its own distinct financial and operational risks.
     As a result of these and other factors, including the AVH Reorganization Proceedings and delays in foreclosure proceedings, we may not receive full (or any) repayment of our BRW Term Loan (including any payment we make in respect of the Cooperation Payment) or our AVH Convertible Loan, and we may be unable to realize the full (or any) value of the BRW Loan Collateral or the collateral securing the AVH Convertible Loan. As a consequence, we may not realize a satisfactory (or any) return on our invested or loaned funds with respect to BRW, AVH and its affiliates.
     Further, these investments may not generate the revenue or operational synergies we expect, and they may distract management focus from our operations or other strategic options. Finally, our reliance on Avianca in the region in which it operates may negatively impact our global operations and results if AVH does not successfully emerge from the AVH Reorganization Proceedings or the COVID-19 pandemic, if the JBA is rejected in connection with the AVH Reorganization Proceedings or if AVH is otherwise impacted by general business risks or performs below our expectations or needs. Any one or more of these events could have a material adverse effect on our operating results or financial condition.
The Company may never realize the full value of its intangible assets or its long-lived assets causing it to record impairments that may negatively affect its financial condition and operating results.
In accordance with applicable accounting standards, the Company is required to test its indefinite-lived intangible assets for impairment on an annual basis, or more frequently where there is an indication of impairment. In addition, the Company is required to test certain of its other assets for impairment where there is any indication that an asset may be impaired.
The Company may be required to recognize losses in the future due to, among other factors, extreme fuel price volatility, tight credit markets, government regulatory changes, decline in the fair values of certain tangible or intangible assets, such as aircraft, route authorities, airport slots and frequent flyer database, unfavorable trends in historical or forecasted results of operations and cash flows and an uncertain economic environment, as well as other uncertainties. For example, during the three and six months ended June 30, 2020, the Company recorded impairment charges of $80 million and $130 million, respectively, for its China routes, primarily as a result of the COVID-19 pandemic and the Company's subsequent suspension of flights to China. In addition, in 2019 and 2018, the Company recorded impairment charges of $90 million and $206 million, respectively, associated with its Hong Kong routes, resulting in the full impairment of these assets. The Company can provide no assurance that a material impairment loss of tangible or intangible assets will not occur in a future period, and the risk of future material impairments has been significantly heightened as result of the effects of the COVID-19 pandemic on our flight schedules and business. The value of the Company's aircraft could also be impacted in future periods by changes in supply and demand for these aircraft. Such changes in supply and demand for certain aircraft types could result from the grounding of aircraft. An impairment loss could have a material adverse effect on the Company's financial condition and operating results.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.PROCEEDS

(a) None
(b) None
(c) The following table presents repurchases of UAL common stock made in the second quarter of fiscal year 2020:
Period 
Total number of shares purchased (a)
 Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (b) Maximum number of shares (or approximate dollar value) of shares that may yet be purchased under the plans or programs (c)
April 2020 264
 $64.42
 —
 $—
May 2020 2,433
 28.60
 —
 —
June 2020 2,674
 38.52
 —
 —
Total 5,371
   —
  
(a) Reflects shares withheld from employees to satisfy certain tax obligations due upon the vesting of restricted stock units. The United Continental Holdings, Inc. 2017 Incentive Compensation Plan and the United Continental Holdings, Inc. 2008 Incentive Compensation Plan each provide for the withholding of shares to satisfy tax obligations due upon the vesting of restricted stock. These shares of common stock withheld to satisfy tax withholding obligations may be deemed to be "issuer purchases" of shares that are required to be disclosed pursuant to this Item.
(b) In December 2017, UAL's Board of Directors authorized a $3.0 billion share repurchase program to acquire UAL's common stock (the "2017 Share Repurchase Program"). During January 2020, the Company completed the 2017 Share Repurchase Program. In July 2019, UAL's Board of Directors authorized a $3.0 billion share repurchase program to acquire UAL's common stock (the "2019 Share Repurchase Program"). On February 24, 2020, following the spread of COVID-19 to Italy, the Company suspended its share repurchases under the 2019 Share Repurchase Program, and, on April 24, 2020, UAL's Board of Directors terminated the 2019 Share Repurchase Program.
(c) The United Continental Holdings, Inc. 2017 Incentive Compensation Plan and the United Continental Holdings, Inc. 2008 Incentive Compensation Plan do not specify a maximum number of shares that may be withheld to satisfy tax obligations due upon the vesting of restricted stock.
None
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ITEM 6. EXHIBITS.
EXHIBIT INDEX
Exhibit No.RegistrantExhibit
4.1UAL
United
4.2UAL
United
4.3UAL
United
4.4UAL
United
4.5UAL
United
4.6UAL
United
4.24.7UAL
*4.34.8UAL
UAL
United
Indenture (including Form of 6.50% Senior Secured Notes due 2027),Warrant (included in Exhibit 4.7 as Annex B thereto)
^10.1
UAL
United
^10.2
UAL
United
^10.3
UAL
United
^10.4
UAL
United
^10.5
UAL
United
^10.6
UAL
United
^10.7
UAL
United
^10.8
UAL
United
^10.9
UAL
United
^10.10
UAL
United
^10.11
UAL
United
10.12UAL
United
61
†10.1UAL
Letter Agreement dated April 29, 2020 among J. Scott Kirby, UAL and United related to salary waiver
10.13
†10.2UAL
United
Letter Agreement dated May 21, 2020 among Brett J. Hart, UALRevolving Credit and United related to salary waiver
10.3
UAL
United
Payroll Support ProgramGuaranty Agreement, dated as of April 20, 2020,21, 2021, among United, UAL, each of the several banks and other financial institutions or entities from time to time party thereto, as lenders, JPMorgan Chase Bank, N.A., as administrative agent, and Wilmington Trust, National Association, as collateral trustee (filed as Exhibit 10.2 to UAL’s Form 8-K filed April 22, 2021 and incorporated herein by reference)
10.14UAL
United
Payroll Support Program 3 Agreement, dated as of April 29, 2021, between United and the United States Department of the Treasury (filed as Exhibit 10.1 to UAL'sUAL’s Form 8-K filed April 23, 2020,30, 2021 and incorporated herein by reference)
10.410.15UAL
United
UAL
United
Term Loan Credit Airlines Holdings, Inc. Amended and Guaranty Agreement, dated as of April 7, 2020, among United, as borrower, UAL, as parent and a guarantor, the subsidiaries of UAL from time to time party thereto other than United, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agentRestated 2021 Incentive Compensation Plan (filed as Exhibit 10.1 to UAL'sUAL’s Form 8-K filed April 13, 2020,May 28, 2021 and incorporated herein by reference)
^10.16
10.5UAL
UAL
United
Supplemental Agreement No. 14Form of Restricted Stock Unit Award Notice pursuant to Purchase Agreement No. 03776, dated as of June 30, 2020, between The Boeing Company and United Airlines, Inc.the 2021 Plan
*10.610.17UAL
UAL
United
Credit Agreement, dated asForm of July 2, 2020, by and among Mileage Plus Holdings, LLC, Mileage Plus Intellectual Property Assets, Ltd.,Performance-Based RSU Award Notice pursuant to the guarantors named therein, the lenders named therein, the lead arrangers named therein, Goldman Sachs Bank USA, as administrative agent, and Wilmington Trust, National Association, as master collateral agent and collateral administrator (filed as Exhibit 10.1 to UAL's Form 8-K filed July 2, 2020, and incorporated herein by reference)2021 Plan
31.1UAL
Certification of the Principal Executive Officer of United Airlines Holdings, Inc. Pursuant to 15U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)
31.2UAL
Certification of the Principal Financial Officer of United Airlines Holdings, Inc. Pursuant to 15U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)
31.3United
Certification of the Principal Executive Officer of United Airlines, Inc. Pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)
31.4United
Certification of the Principal Financial Officer of United Airlines, Inc. Pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)
32.1UAL
Certification of the Chief Executive Officer and Chief Financial Officer of United Airlines Holdings, Inc. Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
32.2United
Certification of the Chief Executive Officer and Chief Financial Officer of United Airlines, Inc. Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
101
UAL

United
The following financial statements from the combined Quarterly Report of UAL and United on Form 10-Q for the quarter ended June 30, 2020,2021, formatted in Inline XBRL: (i) Statements of Consolidated Operations, (ii) Statements of Consolidated Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Condensed Statements of Consolidated Cash Flows, (v) Statements of Consolidated Stockholders' Equity and (vi) Combined Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104
UAL

United
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.
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† Indicates management contract or compensatory plan or arrangement. Pursuant to Item 601(b)(10), United is permitted to omit certain compensation-related exhibits from this report and therefore only UAL is identified as the registrant for purposes of those items.
^ Portions of the referenced exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
* Exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be furnished on a supplemental basis to the Securities and Exchange Commission upon request.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
United Airlines Holdings, Inc.
(Registrant)
Date:July 22, 202021, 2021By:/s/ Gerald Laderman
Gerald Laderman
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date:July 22, 2020By:/s/ Chris Kenny
Chris Kenny
Vice President and Controller
(Principal Accounting Officer)
United Airlines, Inc.
(Registrant)
Date:July 22, 2020By:/s/ Gerald Laderman
Gerald Laderman
Executive Vice President and Chief Financial Officer

(Principal Financial Officer)
Date:July 22, 202021, 2021By:/s/ Chris Kenny
Chris Kenny

Vice President and Controller

(Principal Accounting Officer)
United Airlines, Inc.
(Registrant)
Date:July 21, 2021By:/s/ Gerald Laderman
Gerald Laderman
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date:July 21, 2021By:/s/ Chris Kenny
Chris Kenny
Vice President and Controller
(Principal Accounting Officer)


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