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UAL Corporation Reports Second Quarter 2008 Results

July 22, 2008

CHICAGO, July 22 /PRNewswire-FirstCall/ — Driven by a $773 million increase in consolidated fuel expense, UAL Corporation , the holding company whose primary subsidiary is United Airlines, reported a net loss of $2.7 billion or $151 million, excluding certain largely non-cash accounting charges. For the second quarter ended June 30, 2008, the company:

   -- Reported basic and diluted loss per share of $1.19 excluding certain      largely non-cash accounting charges described below. United's reported      GAAP loss per share was $21.47.    -- Recorded $2.6 billion of previously announced accounting charges,      including a $2.3 billion non-cash special charge for goodwill      impairment.    -- Continued its focus on controlling costs, with mainline cost per      available seat mile (CASM), excluding fuel and the above mentioned      accounting charges, up 2.6 percent versus the same period in 2007.      Mainline CASM for the quarter was up 85.5 percent versus the second      quarter of 2007, reflecting a 55.4 percent increase in mainline fuel      price per gallon and the significant accounting charges.    -- Strengthened its cash position by raising $90 million through new      financings, asset sales and freeing up $130 million in restricted cash.      In addition, the company expects to raise $330 million in cash in the      third quarter through aircraft financings and the release of restricted      cash, resulting in a total cash balance improvement of approximately      $550 million.    -- Announced further capacity cuts and the retirement of the entire B737      fleet as well as six B747s. In total, United will retire 100 aircraft      and will reduce fourth-quarter mainline domestic capacity 15.5 percent      to 16.5 percent year-over-year. In conjunction with the capacity      reductions, the company expects to reduce its workforce by      approximately 7,000 by year-end 2009.    -- Announced an alliance partnership with Continental Airlines -- a      partnership that will create the most comprehensive domestic system by      linking networks as well as creating potential for cost savings and      operational efficiencies, while simultaneously benefiting customers.     Quarterly Net Loss Driven By Record High Fuel Prices  

The company’s financial results in the second quarter of 2008 were impacted by previously disclosed largely non-cash accounting charges that, coupled with a $773 million or 54.1 percent increase in consolidated fuel expense, caused the company’s net, pre-tax and operating results to be significantly lower year-over-year. The accounting charges include:

   -- A non-cash special charge of $2.3 billion for goodwill impairment.    -- Non-cash special charges of $194 million relating to the impairment of      B737 aircraft that are being retired from the company's operating      fleet, aircraft pre-delivery deposits and certain indefinite-lived      intangible assets other than goodwill net of a related tax benefit of      $29 million.    -- Severance charges of $82 million related to the staffing reductions      that will result from the capacity reductions the company has      announced. Cash payments related to severance will be incurred over      time as we implement our capacity reduction plans.    -- Other largely non-cash charges of $54 million related to certain      projects that have been terminated or deferred and a non-cash      adjustment to increase certain employee benefit obligations.    -- A $29 million cash gain from a litigation settlement.    

These accounting charges added $2.6 billion of largely non-cash expense to the company’s operating costs for the quarter. The company may record additional accounting charges in future quarters related to its capacity reductions, including possible non-cash fleet and property and equipment impairment charges, further intangible asset impairment charges, expenses to terminate early certain facility and aircraft leases and additional severance costs. However, at this time, the company is unable to reasonably estimate the amount and timing of these future charges.

Excluding the above accounting charges, in the second quarter of 2008 the company generated an operating loss of $87 million, versus operating income of $537 million in the year ago period primarily as a result of the significant increase in fuel expense. The company generated a net loss, excluding these accounting charges, of $151 million in the second quarter of 2008, $425 million worse than the second quarter of 2007. Including the impact of these accounting charges, the company reported an operating loss for the quarter of $2.69 billion and a net loss of $2.73 billion.

Excluding a $29 million tax benefit related to the impairment of intangible assets, the company did not recognize any income tax benefit in the second quarter of 2008. Because of its Net Operating Loss carry-forwards, the company expects to pay minimal cash taxes for the foreseeable future.

Despite continued unit revenue growth, and better cost performance compared to its prior guidance, these gains were insufficient to offset the more than 55 percent increase in average fuel price per gallon.

“Our industry is challenged as never before by the unrelenting price of oil, and United is taking aggressive action to offset unprecedented fuel costs and to strengthen the competitiveness of our business,” said Glenn Tilton, United president, chairman and CEO. “The elimination of our entire B737 fleet and our alliance with Continental are examples of the different approach we are taking to respond to dramatically changed market conditions to deliver better results for all our stakeholders.”

Taking Additional Actions to Address Unprecedented Fuel Costs

While the price of jet fuel has steadily increased over the last few years, the rise in 2008 has been unprecedented, with fuel increasing by more than 37 percent since the beginning of the year. United is executing an aggressive plan to address the skyrocketing cost of fuel by:

   -- Sizing the business appropriately for the environment, leading the      industry in permanently reducing capacity. United is removing 94      narrowbody aircraft and 6 widebody aircraft from its operations,      retiring its entire fleet of B737s in the process.    -- Using its capacity discipline to pass higher commodity costs to      customers through fare and fuel surcharge initiatives.    -- Creating new revenue streams by charging for a la carte service, such      as checked bags.    -- Reducing costs across the business.    -- Reducing capital expenditures.    

United also recently announced a framework agreement to form a unique partnership with Continental Airlines, one that responds to the need for different thinking and solutions in an industry confronted by extraordinary and volatile fuel costs and dramatically changed market conditions. This agreement will result in extensive cooperation, linking networks and services worldwide to the benefit of customers while creating revenue opportunities, cost savings and other operating efficiencies. In addition, Continental plans to join United in the Star Alliance, the largest airline alliance in the world. This week, Continental Airlines, United Airlines and eight other member airlines in the Star Alliance plan to ask the U.S. Department of Transportation (DOT) to allow Continental to join the group of carriers that already hold antitrust immunity. Approval by the DOT would enable Continental, United and the other immunized Star Alliance carriers to work closely together to deliver highly competitive flight schedules, fares and service.

Strengthened Cash Position With $550 Million Raised From New Transactions

During the quarter, the company raised $90 million through new aircraft financing transactions and asset sales and freed up $130 million in restricted cash by replacing it with a $100 million letter of credit.

In addition, early in the third quarter, the company received funds from a $241 million aircraft financing transaction whereby it raised additional debt. The company freed up another $50 million of restricted cash by replacing it with letters of credit worth $34 million. The company also reached agreements in principle for the sale of assets worth approximately $40 million.

As a result of all these actions, the company raised approximately $550 million in cash.

Despite escalating fuel prices, the company generated positive operating and free cash flow during the quarter. The company realized $217 million of operating cash flow and $127 million of free cash flow, defined as operating cash flow less capital expenditures, during the second quarter.

The company reduced total on and off balance sheet debt by $292 million in the quarter to $11.1 billion, despite entering into new debt financing. The company ended the quarter with an unrestricted cash balance of $2.9 billion and a restricted cash balance of $655 million. The company’s quarter-end cash balance does not include any cash deposits associated with collateral from its fuel hedge counterparties.

In addition to its strong cash balance, and subsequent to the financings and asset sales previously discussed, the company continues to have over $3 billion in unencumbered hard assets that it can use to further enhance liquidity through asset sales and/or secured financing transactions.

“We continue to take the difficult, but necessary action across the company to reduce our costs, including reducing our workforce by more than 7,000 people,” said Jake Brace, United executive vice president and CFO. “We are maintaining our cost guidance for the year even as we dramatically reduce capacity, and are improving our liquidity, ensuring United is well positioned to weather the current environment.”

Capacity Discipline Drives Revenue Growth

The company’s focus on capacity discipline and strong revenue management drove continued revenue growth. Total revenues increased by 3.0 percent in the second quarter of 2008 compared to the same period in 2007, as growth in passenger unit revenue and cargo more than offset the year-over-year reduction in capacity. The company’s mainline RASM increased by 5.1 percent year-over-year from the second quarter of 2007 due to strong passenger and cargo yield performance partially offset by lower passenger load factors.

The company’s cargo business continued its strong performance with a 30.9 percent year-over-year increase in revenue. Higher fuel surcharges, foreign exchange gains and strong yield improvements contributed to the cargo revenue increase.

Total passenger revenues increased by 2.6 percent in the second quarter compared to the prior year as a result of a 7.7 percent gain in consolidated yield, more than offsetting the 3 point decline in system load factor. Mainline domestic PRASM for the quarter increased by 5.9 percent, aided by a 4.8 percent reduction in capacity. International PRASM grew 3.2 percent in the second quarter compared to the same period last year, despite a 3.7 percent increase in international capacity year-over-year. Consolidated PRASM increased 3.9 percent year-over-year.

The company’s change to deferred revenue accounting for the Mileage Plus program, from the previous incremental cost method, decreased consolidated passenger revenue by approximately $42 million in the second quarter of 2008. The change to the expiration period for Mileage Plus accounts without activity from 36 to 18 months, which the company instituted in January 2007, did not impact the company’s revenue results in the second quarter of 2008, as it did in the second quarter of 2007.

In the second quarter of 2007 deferred revenue accounting increased consolidated passenger revenue by a net $1 million, including $47 million of non-cash revenue recognized from the expiration policy change. In total, these Mileage Plus accounting changes resulted in a net year-over-year decrease in consolidated passenger revenues of $43 million for the second quarter of 2008 compared to the same period in 2007.

As the company no longer follows the incremental cost method of accounting, differences between the two accounting methods are calculated using the company’s best estimate of the incremental cost method. Excluding Mileage Plus accounting impacts, consolidated PRASM increased 4.9 percent year-over-year.

Regional affiliate PRASM was up 0.3 percent compared to last year, with a 6.6 percent increase in yield and a 1.1 percent capacity decline. Load factor for regional affiliates decreased 4.7 points in the second quarter of 2008 compared to the second quarter of 2007, while stage length for regional affiliates was up 5.3 percent for the same period.

       Comparison of 2008 Second Quarter Geographic Passenger Revenue                         Versus 2007 Second Quarter                           2Q 2008     Passenger                         Passenger     Revenues      PRASM         ASM(1)                          Revenue    % Increase/  % Increase/   % Increase/   Geographic Area      (millions)    (Decrease)   (Decrease)    (Decrease)    North America           $2,414         0.9%         5.9%        (4.8)%   Pacific                   $830         1.7%         2.4%        (0.7)%   Atlantic                  $723        13.0%         0.8%        12.1%   Latin America             $132        11.2%        16.0%        (4.1)%     Total Mainline        $4,099         3.3%         4.7%        (1.3)%    Regional Affiliates       $797        (0.9)%        0.3%        (1.1)%    Total Consolidated      $4,896         2.6%         3.9%        (1.3)%    Adjusted    Consolidated(2)        $4,938         3.5%         4.9%     (1) ASM (available seat miles)   (2) Consolidated Passenger Revenue and PRASM adjusted for Mileage Plus       effects (See Footnote 5[b]).     Focus On Improving Operating Performance  

For the twelve month period ending May 31, 2008, the latest available, United ranked fifth among the six major U.S. network carriers in Department of Transportation on-time rankings. As part of the company’s efforts to improve performance, it has implemented an operational agenda that stresses the day-to-day actions required to provide a reliable product, deliver good service and maintain industry leading safety standards and practices. To improve reliability performance, the company is increasing crew reserves, increasing average scheduled ground time and improving its arrival readiness at gates. This, coupled with the reduction in ground delays expected to result from the industry-wide cut in capacity as well as the new O’Hare runway that will come online in November, is expected to materially improve the company’s on-time performance.

“Our focus and our energy are all about generating a step change in our performance,” said John Tague, United executive vice president and COO. “We’ve set the targets, put the right leaders in place, and we’re executing against our plan with a clear understanding of what we need to achieve, how we need to do it, and that we are ultimately accountable for that outcome.”

Continued Focus on Cost Control

Mainline CASM increased by 85.5 percent year-over-year to 20.39 cents reflecting the large special charge and other largely non-cash accounting charges that the company took in the second quarter, as well as the steep increase in fuel expense. Second quarter mainline CASM, excluding these charges and fuel, increased by 2.6 percent from the year-ago quarter to 7.80 cents, better than the company’s guidance due to lower than expected maintenance costs and an airport rent cost. This result demonstrates United’s continued focus on controlling non-fuel costs.

                                 Second Quarter Increase/(Decrease)                               Mainline                  Consolidated                                          %                           %                          2008    2007   Chg.        2008    2007    Chg.   CASM (cents)          20.39   10.99   85.5%       20.41   11.68   74.7%   CASM excluding    accounting charges    (cents)              13.03   10.99   18.6%       13.81   11.68   18.2%   CASM excluding fuel    and accounting    charges(cents)        7.80    7.60    2.6%        8.23    8.08    1.9%    

The company has classified the majority of its various fuel hedging positions as economic hedges for accounting purposes. The company recorded a net gain of $238 million on hedge contracts in the second quarter — a realized gain of $30 million relating to the current quarter and an unrealized gain of $208 million relating to contracts settling in future periods. The cash benefit of hedging during the quarter was $51 million. These gains were recorded in mainline aircraft fuel expense and resulted in lower fuel expense, than would otherwise be the case, for the second quarter.

The company also recognized a net gain of $22 million from fuel hedges that did not qualify as economic hedges and were therefore reported as non-operating income; $1 million of this gain was realized during the current quarter.

   Business Highlights    -- In June, the company announced a new fee of $15 for first checked bags.      The company anticipates that this charge along with the $25 second      checked bag fee and several other changes to bag fees will generate      $275 million of incremental revenue on an annualized basis.    -- United became the first U.S. carrier to offer iPod and iPhone      connectivity to its in-flight entertainment system, enabling customers      to enjoy their individual content on a 15.4-inch personal television,      all while the iPod or iPhone charges. United's entire fleet of      international, widebody aircraft are being reconfigured over the next      two years with lie-flat seats, on-demand entertainment, and iPod and      iPhone connectivity in first and business class.    -- United announced several new codeshare partnerships during the second      quarter including new relationships with Hawaiian, Jet Airways and Aer      Lingus. These partnerships will significantly expand the number of      flights available to United customers in Hawaii, India and Ireland.     -- On June 12, 2008, the company held its annual meeting of shareholders.      At the meeting, the company's shareholders overwhelmingly elected each      of its directors to a one-year term and also approved an equity      incentive plan that will enable United to attract, retain and reward      key leaders.     Fresh Start Reporting  

Upon emergence from its Chapter 11 reorganization in February 2006, the company adopted fresh-start reporting in accordance with SOP 90-7. The company’s emergence resulted in a new reporting entity with no retained earnings or accumulated deficit as of February 1, 2006. Accordingly, the company’s financial information shown for periods prior to February 1, 2006, is not comparable to consolidated financial statements presented on or after that date. For further discussion of fresh-start reporting, please refer to the company’s 2006 and 2007 Form 10-Ks as filed with the Securities and Exchange Commission (SEC).

To offer additional information for investors, the company has identified certain items consisting only of major non-cash fresh-start reporting and exit-related credits and charges (Note 7). While it is not practical for the company to present information for all items that are not comparable in the pre- and post-exit periods, the company believes that the items identified in Note 7 are the material non-cash fresh-start reporting and exit-related items and that such information is useful to investors in understanding year-over-year performance. These fresh-start and exit-related items are discussed in the company’s 2006 and 2007 Form 10-Ks.

Outlook

In response to higher fuel prices and a weaker domestic economic environment, the company is reducing its capacity for 2008 and 2009 and currently expects the following year-over-year capacity changes:

     Capacity  Third Quarter   Fourth Quarter     Full-year      Full-year   (Available      2008            2008             2008            2009    Seat Miles)                                                (versus 2008)   North    America   -6.5% to -5.5% -16.5% to -15.5% -8.5% to -7.5% -13.5% to -12.5%   Inter-    national  -2.0% to -1.0%  -7.5% to -6.5%  +0.5% to +1.5%  -8.0% to -7.0%   Mainline   -4.5% to -3.5% -12.5% to -11.5% -5.0% to -4.0% -11.0% to -10.0%   Express    -0.5% to +0.5%  -3.5% to -2.5%  -2.0% to -1.0%  +6.5% to +7.5%   Consoli-    dated    Domestic  -5.5% to -4.5% -14.0% to -13.0% -7.5% to -6.5% -10.0% to -9.0%   Consoli-    dated     -4.0% to -3.0% -11.5% to -10.5% -4.5% to -3.5%  -9.0% to -8.0%     

Despite the significant reduction in capacity, the company expects 2008 full-year mainline CASM, excluding fuel, special items and the largely non-cash accounting charges discussed earlier, to increase between 1.5 and 2.5 percent, in line with prior guidance, as a result of its newly expanded $500 million cost reduction program, an increase of $100 million. Mainline CASM, excluding fuel, severance and special items, is anticipated to increase between 1.5 and 2.5 percent in the third quarter of 2008.

As United reduces capacity, it is reducing the number of salaried, management and frontline employees. In addition to the 1,500 or 20 percent reduction in the salaried and management workforce that the company announced last quarter, the company now expects to reduce its frontline workforce by more than 5,500 employees by the end of 2009. United is working to reduce the impact of capacity reductions on employees through voluntary programs.

As previously announced, the company has also set a non-aircraft capital budget of $450 million for 2008, $200 million less than originally planned.

As of July 21, the company had hedged approximately 44 percent of its estimated 2008 third quarter mainline fuel consumption, of which approximately 34 percent is through three-way collars with upside protection beginning on average at a crude equivalent price of $111 per barrel and capped at $127 per barrel, with payment obligations beginning on average at a crude equivalent price below $107 per barrel. The remaining 10 percent is hedged through collars with upside protection beginning at an average crude equivalent price of $111 per barrel with payment obligations on average beginning at crude equivalent price below $100 per barrel.

As of the same date, United had hedged 47 percent of its forecasted mainline fuel consumption for the fourth quarter of 2008, of which 29 percent is through three-way collars with upside protection on average beginning from $113 per barrel and capped at $134 per barrel with payment obligations on average beginning if crude oil drops below $107 per barrel. The remaining 18 percent is hedged through collars with upside protection on average beginning at a crude oil equivalent price of $109 per barrel with payment obligations on average beginning if crude oil drops below $99 per barrel.

As of the same date, United had hedged 14 percent of its forecasted mainline fuel consumption for the full year of 2009, of which 10 percent is through three-way collars with upside protection on average beginning from $121 per barrel and capped at $152 per barrel with payment obligations on average beginning if crude oil drops below $102 per barrel. The remaining 4 percent is hedged through collars with upside protection on average beginning at a crude oil equivalent price of $119 per barrel with payment obligations on average beginning if crude oil drops below $108 per barrel.

The company expects mainline jet fuel price per gallon, including the impact of hedges, to average $4.08 per gallon in the third quarter of 2008.

Notes 5 and 8 to the attached Statements of Consolidated Operations provides a reconciliation of net income or loss reported under GAAP to net income or loss adjusted for special items and accounting charges for all periods presented as well as a reconciliation of other non-GAAP financial measures.

About United

United Airlines operates more than 3,200* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 965 destinations in 162 countries worldwide. United’s 55,000 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company’s Web site at united.com.

*Based on United’s flight schedule between Jan. 1, 2008, and Dec. 31, 2008.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements included in this press release are forward-looking and thus reflect the company’s current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to the operations and business environment of the company that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Factors that could significantly affect net earnings, revenues, expenses, costs, load factor and capacity include, without limitation, the following: the company’s ability to comply with the terms of its credit facility; the costs and availability of financing; the company’s ability to execute its business plan; the company’s ability to realize benefits from its resource optimization efforts and cost reduction initiatives; the company’s ability to attract, motivate and/or retain key employees; the company’s ability to attract and retain customers; demand for transportation in the markets in which the company operates; general economic conditions (including interest rates, foreign currency exchange rates, crude oil prices and energy refining capacity in relevant markets); the effects of any hostilities or act of war or any terrorist attack; the ability of other air carriers with whom the company has alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the costs and availability of aircraft insurance; the costs of jet fuel; our ability to cost-effectively hedge against increases in the price of jet fuel; the costs associated with security measures and practices; labor costs; industry consolidation; competitive pressures on pricing and on demand; capacity decisions of United and/or its competitors; U.S. or foreign governmental legislation, regulation and other actions, including the effect of open skies agreements; the company’s ability to utilize its net operating losses; the ability of the company to maintain satisfactory labor relations and our ability to avoid any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth from time to time in UAL’s reports to the United States Securities and Exchange Commission. Consequently, the forward-looking statements should not be regarded as representations or warranties by the company that such matters will be realized. The company disclaims any intent or obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise.

                  UAL CORPORATION AND SUBSIDIARY COMPANIES             STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)                  (In millions, except per share amounts)                                                Three Months Ended      %                                                    June 30,        Increase/        (In accordance with GAAP)               2008        2007   (Decrease)   Operating revenues:        Passenger - United Airlines           $4,099      $3,968        3.3        Passenger - Regional Affiliates          797         804       (0.9)        Cargo                                    237         181       30.9        Other operating revenues                 238         260       (8.5)                                               5,371       5,213        3.0   Operating expenses:        Aircraft fuel                          1,848       1,206       53.2        Salaries and related costs (Note 5)    1,179       1,019       15.7        Regional affiliates (a)                  847         733       15.6        Purchased services (Note 5)              371         335       10.7        Aircraft maintenance materials and         outside repairs                         295         284        3.9        Depreciation and amortization            216         229       (5.7)        Landing fees and other rent              199         215       (7.4)        Distribution expenses                    193         197       (2.0)        Aircraft rent                            100         105       (4.8)        Cost of third party sales                 65          77      (15.6)        Goodwill impairment (Note 5)           2,277         -            -        Other impairments and special         items (Note 5)                          223         -            -        Other operating expenses (Note 5)        252         276       (8.7)                                               8,065       4,676       72.5    Earnings (loss) from operations            (2,694)        537          -    Other income (expense):        Interest expense                        (126)       (139)      (9.4)        Interest income                           28          62      (54.8)        Interest capitalized                       5           4       25.0        Miscellaneous, net                        28           1         NM                                                 (65)        (72)      (9.7)    Earnings (loss) before income taxes and    equity in earnings of affiliates          (2,759)        465          -   Income tax expense (benefit) (Note 5)         (29)        192          -    Earnings (loss) before equity in earnings    of affiliates                             (2,730)        273          -   Equity in earnings of affiliates, net    of tax                                         1           1          -   Net income (loss)                         $(2,729)       $274          -     Earnings (loss) per share, basic          $(21.47)      $2.31   Earnings (loss) per share, diluted        $(21.47)      $1.83    Weighted average shares, basic              127.1       117.4   Weighted average shares, diluted            127.1       153.4    See accompanying notes.     (a) Regional affiliates expense includes regional aircraft rent expense.        See Note 2 for more information.     NM  Not meaningful.                     UAL CORPORATION AND SUBSIDIARY COMPANIES             STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)                  (In millions, except per share amounts)                                                 Six Months Ended       %                                                    June 30,        Increase/        (In accordance with GAAP)               2008        2007   (Decrease)   Operating revenues:        Passenger - United Airlines           $7,644      $7,232        5.7        Passenger - Regional Affiliates        1,512       1,479        2.2        Cargo                                    455         349       30.4        Other operating revenues                 471         526      (10.5)                                              10,082       9,586        5.2   Operating expenses:        Aircraft fuel                          3,423       2,247       52.3        Salaries and related costs (Note 5)    2,225       2,087        6.6        Regional affiliates (a)                1,626       1,425       14.1        Purchased services (Note 5)              720         636       13.2        Aircraft maintenance materials and         outside repairs                         612         565        8.3        Depreciation and amortization            436         449       (2.9)        Landing fees and other rent              429         453       (5.3)        Distribution expenses                    377         385       (2.1)        Aircraft rent                            199         205       (2.9)        Cost of third party sales                129         170      (24.1)        Goodwill impairment (Note 5)           2,277         -            -        Other impairments and special         items (Note 5)                          223         (22)         -        Other operating expenses (Note 5)        541         541          -                                              13,217       9,141       44.6    Earnings (loss) from operations            (3,135)        445          -    Other income (expense):        Interest expense                        (261)       (345)     (24.3)        Interest income                           76         120      (36.7)        Interest capitalized                      10           9       11.1        Miscellaneous, net                         9          (1)         -                                                (166)       (217)     (23.5)    Earnings (loss) before income taxes and    equity in earnings of affiliates          (3,301)        228          -   Income tax expense (benefit) (Note 5)         (32)        108          -    Earnings (loss) before equity in    earnings of affiliates                    (3,269)        120          -   Equity in earnings of affiliates, net    of tax                                         3           2       50.0   Net income (loss)                         $(3,266)       $122          -     Earnings (loss) per share, basic          $(26.33)      $1.00   Earnings (loss) per share, diluted        $(26.33)      $0.88    Weighted average shares, basic              124.1       117.2   Weighted average shares, diluted            124.1       153.1    See accompanying notes.     (a) Regional affiliates expense includes regional aircraft rent expense.        See Note 2 for more information.     NM  Not meaningful.                     UAL CORPORATION AND SUBSIDIARY COMPANIES        CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)                               (In millions)                       Three Months Ended    %       Six Months Ended     %                          June 30,      Increase/      June 30,     Increase/   (In accordance      2008     2007   (Decrease)   2008     2007  (Decrease)    with GAAP)    Cash flows    provided (used)    by operating    activities        $217    $1,034     (79.0)     $137    $1,660     (91.7)    Cash flows    provided (used)    by investing    activities:     Net (purchases)      sales of      short-term      investments      486    (2,389)        -     2,295    (2,270)        -     Additions to      property and      equipment       (131)      (78)     67.9      (232)     (146)     58.9     (Increase)      decrease in      restricted      cash (a)          73       (15)        -       101       (24)        -     Proceeds from      litigation on      advance      deposits          41         -         -        41         -         -     Proceeds from      the sale of      property and      equipment         14         5     180.0        14        11      27.3     Other, net        (11)      (12)     (8.3)      (22)      (26)    (15.4)                       472    (2,489)        -     2,197    (2,455)        -    Cash flows    provided (used)    by financing    activities:     Repayment of      Credit      Facility           -         -         -        (9)     (986)    (99.1)     Repayment of      other debt      (169)     (705)    (76.0)     (351)   (1,023)    (65.7)     Special      distribution       -         -         -      (251)       -          -     Principal      payments      under capital      leases          (188)      (35)    437.1      (200)      (48)    316.7     Decrease in      capital lease      deposits         154         -         -       154        -          -     Increase in      deferred      financing      costs           (109)       (9)       NM      (111)      (20)    455.0     Proceeds from      issuance of      secured notes     84       694     (87.9)       84       694     (87.9)     Other, net          -         1    (100.0)      (10)       13         -                      (228)      (54)    322.2      (694)   (1,370)    (49.3)    Increase    (decrease) in    cash and cash    equivalents    during the    period             461    (1,509)        -     1,640    (2,165)        -   Cash and cash    equivalents at    beginning of    the period       2,438     3,176     (23.2)    1,259     3,832     (67.1)   Cash and cash    equivalents at    end of the    period          $2,899    $1,667      73.9    $2,899    $1,667      73.9     Reconciliation of cash and cash equivalents to    total cash and cash equivalents, short-term    investments and restricted cash:                           As of           %                         June 30,      Increase/                      2008     2007   (Decrease)    Cash and cash    equivalents     $2,899    $1,667      73.9   Short-term    investments          -     2,582    (100.0)   Restricted    cash (a)           655       871     (24.8)   Total cash and    cash    equivalents,    short-term    investments    and    restricted    cash (b)        $3,554    $5,120     (30.6)     (a) The Company's restricted cash primarily relates to reserves with       institutions that process its credit card ticket sales, which       fluctuate quarterly due to seasonality and the level of advance ticket       sales, security deposits for airport leases and security for workers'       compensation obligations, which decreased significantly in the second       quarter of 2008 due to the posting of letters of credit.   (b) See Note 5[i] for the Company's computation of free cash flow.    NM  Not meaningful.                          CONSOLIDATED NOTES (UNAUDITED)    (1) UAL Corporation ("UAL" or the "Company") is a holding company whose       principal subsidiary is United Air Lines, Inc. ("United").  On       December 9, 2002, UAL, United and twenty-six direct and indirect       wholly-owned subsidiaries filed Chapter 11 petitions for relief in the       U.S. Bankruptcy Court for the Northern District of Illinois.  On       February 1, 2006 (the "Effective Date"), the Company emerged from       Chapter 11.  In connection with its emergence from Chapter 11       bankruptcy protection, the Company implemented fresh-start reporting       in accordance with American Institute of Certified Public Accountants'       Statement of Position 90-7, "Financial Reporting by Entities in       Reorganization Under the Bankruptcy Code" on the Effective Date.  The       application of fresh-start reporting resulted in significant changes       to the historical financial statements.    (2) United has contractual relationships with various regional carriers to       provide regional jet and turboprop service branded as United Express.       Under these agreements, United pays the regional carriers       contractually agreed fees for crew expenses, maintenance expenses and       other costs of operating these flights.  These costs include aircraft       rents of $103 million and $107 million for the three months ended June       30, 2008 and 2007, respectively, and $207 million and $214 million for       the six months ended June 30, 2008 and 2007, respectively, which are       included in regional affiliate expense in our Statements of       Consolidated Operations.    (3) UAL's results of operations include aircraft fuel expense for both       United mainline jet operations and regional affiliates.  Aircraft fuel       expense incurred as a result of the Company's regional affiliates'       operations is reflected in Regional affiliates operating expense.  In       accordance with UAL's agreement with its regional affiliates, these       costs are incurred by the Company.                                  Year-Over-Year Impact of Fuel Expense                           United Mainline and Regional Affiliate Operations                         Three Months Ended            Six Months Ended   (In millions,              June 30,      %             June 30,      %   except per gallon)       2008    2007  Change        2008    2007  Change   Mainline fuel expense  $1,848  $1,206   53.2       $3,423  $2,247   52.3   Regional affiliates    fuel expense             355     224   58.5          633     418   51.4   United system fuel    expense               $2,203  $1,430   54.1       $4,056  $2,665   52.2    Mainline fuel    consumption (gallons)    571     579   (1.4)       1,127   1,130   (0.3)   Mainline average jet    fuel price per gallon    (in cents)             323.6   208.3   55.4        303.7   198.8   52.8    Regional affiliates    fuel consumption    (gallons)                 94      96   (2.1)         186     188   (1.1)   Regional affiliates    average jet fuel    price per gallon (in    cents)                 377.7   233.3   61.9        340.3   222.3   53.1    (4) The tables below set forth certain operating statistics by geographic       region and the Company's mainline, regional affiliates and       consolidated operations:    (% change from prior year)     Three Months     Ended    June 30,   North                                   Regional      2008    America Pacific Atlantic Latin Mainline Affiliates Consolidated   Passenger    revenues    0.9      1.7     13.0  11.2     3.3     (0.9)        2.6   ASM         (4.8)    (0.7)    12.1  (4.1)   (1.3)    (1.1)       (1.3)   RPM         (7.1)    (5.6)     7.6  (3.4)   (4.5)    (7.0)       (4.8)   PRASM        5.9      2.4      0.8  16.0     4.7      0.3         3.9   Yield [a]    8.6      7.8      4.2  13.5     8.2      6.6         7.7   Load factor    (points)   (2.2)    (4.1)    (3.4)  0.6    (2.7)    (4.7)       (3.0)     Six Months     Ended    June 30,   North                                   Regional      2008    America Pacific Atlantic Latin Mainline Affiliates Consolidated   Passenger    revenues    2.3      6.5     16.3  13.6     5.7      2.2         5.1   ASM         (5.5)     2.4     15.0  (0.1)   (0.7)    (1.2)       (0.7)   RPM         (7.6)    (2.7)    11.0  (1.2)   (3.7)    (6.4)       (4.0)   PRASM        8.3      4.0      1.1  13.7     6.4      3.5         6.0   Yield [a]   10.7      9.4      4.4  15.3     9.8      9.1         9.5   Load factor    (points)   (1.8)    (4.1)    (2.9) (0.9)   (2.6)    (4.1)       (2.7)    [a] Yields for geographic regions exclude charter revenue, industry       reduced fares, passenger charges and related revenue passenger miles.                          CONSOLIDATED NOTES (UNAUDITED)    (5) The Company incurred significant charges related to tangible and       intangible asset impairments, severance and other charges that       significantly impacted its results in the three and six months ended       June 30, 2008. Collectively, these charges are identified as       "impairments and other charges" in the Regulation G reconciliations       below.  These items consist of the following:                                   Three Months    Six Months                                     Ended          Ended                                 June 30, 2008   June 30, 2008                                                               Income                                                               Statement                                                               Classification                  Goodwill impairment $2,277       $2,277      Goodwill                                                               impairment          Intangible asset impairments     80           80     Aircraft and deposit impairments    143          143                    Other impairments    223          223      Other                                                               impairments                                                               and special                                                               items                             Severance     82           82      Salaries and                                                               related costs             Employee benefit charges     28 (a)       34 (a)  Salaries and                                                               related costs   Litigation-related settlement gain    (29)         (29)     Other                                                               operating                                                               expenses           Purchased services charges     26 (b)       26 (b)  Purchased                                                               services        Pre-tax impairments and other                              charges  2,607        2,613      Tax benefit on intangible asset                          impairments    (29)         (29)     Income tax                                                               benefit    Impairments and other charges, net                               of tax $2,578       $2,584    (a) Amount relates to additional charges to adjust certain employee       benefit obligations.   (b) Amount relates to expense for certain projects and transactions that       have been terminated or indefinitely postponed by the Company.        The Company recorded a special operating expense credit of $22 million       in the three months ended March 31, 2007 related to bankruptcy       facility lease secured interest litigation, which remains unresolved       from the Company's recent reorganization.        Pursuant to SEC Regulation G, the Company has included the following       reconciliation of reported non-GAAP financial measures to comparable       financial measures reported on a GAAP basis.  The Company believes       that excluding fuel costs from certain measures is useful to investors       because it provides an additional measure of management's performance       excluding the effects of a significant cost item over which management       has limited influence.  The Company also believes that adjusting for       special items is useful to investors because they are non-recurring       items not indicative of the Company's on-going performance. In       addition, the Company adjusts for Mileage Plus impacts for better       comparison to several of its peers as many still apply the incremental       cost method of accounting to their loyalty plans.        The tables below set forth the reconciliation of GAAP and non-GAAP       financial measures for certain operating statistics that are used in       determining key indicators such as adjusted passenger revenue per       revenue passenger mile ("Yield"), operating revenue per available seat       mile ("RASM"), operating margin, net income (loss) and operating       expense per available seat mile ("CASM").                            Three Months Ended         Six Months Ended                              June 30,         %        June 30,        %                            2008     2007   Change    2008    2007   Change   [a] Yield  (In millions)       Mainline       Passenger - United        Airlines            $4,099  $3,968    3.3    $7,644  $7,232    5.7       Less: industry        reduced fares and        passenger charges      (12)    (11)   9.1       (22)    (21)   4.8       Mainline adjusted        passenger revenue   $4,087  $3,957    3.3    $7,622  $7,211    5.7       Mainline revenue        passenger miles     29,443  30,833   (4.5)   56,370  58,562   (3.7)       Adjusted mainline        yield (in cents)     13.88   12.83    8.2     13.52   12.31    9.8        Consolidated       Consolidated        passenger revenue   $4,896  $4,772    2.6    $9,156  $8,711    5.1       Less: industry        reduced fares and        passenger charges      (12)    (11)   9.1       (22)    (21)   4.8       Consolidated        adjusted passenger        revenue             $4,884  $4,761    2.6    $9,134  $8,690    5.1       Consolidated        revenue passenger        miles               32,581  34,207   (4.8)   62,317  64,913   (4.0)       Adjusted        consolidated        yield (in cents)     14.99   13.92    7.7     14.66   13.39    9.5     [b] PRASM  (In millions)       Mainline       Passenger - United        Airlines            $4,099  $3,968    3.3    $7,644  $7,232    5.7       Add:  Mileage Plus        - effect of        accounting change       35      37   (5.4)       89     150  (40.7)       Less:  Mileage Plus        - effect of        expiration period        change                 -       (39)(100.0)      -       (62)(100.0)       Mainline adjusted        passenger revenue   $4,134  $3,966    4.2    $7,733  $7,320    5.6       Mainline available        seat miles          35,394  35,875   (1.3)   69,922  70,410   (0.7)       Adjusted mainline        PRASM (in cents)     11.68   11.06    5.6     11.06   10.40    6.3        Regional Affiliates       Passenger - Regional        Affiliates            $797    $804   (0.9)   $1,512  $1,479    2.2       Add:  Mileage Plus -        effect of        accounting change        7       9  (22.2)       18      31  (41.9)       Less:  Mileage Plus -        effect of expiration        period change          -        (8)(100.0)      -       (13)(100.0)       Regional affiliates        passenger revenue     $804    $805   (0.1)   $1,530  $1,497    2.2       Regional affiliates        available seat        miles                4,126   4,174   (1.1)    8,007   8,103   (1.2)       Regional affiliates        PRASM (in cents)     19.49   19.29    1.0     19.11   18.47    3.5        Consolidated       Consolidated        passenger        revenues            $4,896  $4,772    2.6    $9,156  $8,711    5.1       Add:  Mileage Plus -        effect of        accounting change       42      46   (8.7)      107     181  (40.9)       Less:  Mileage Plus -        effect of expiration        period change            -     (47)(100.0)        -     (75)(100.0)       Adjusted        consolidated        passenger revenues  $4,938  $4,771    3.5    $9,263  $8,817    5.1       Consolidated        available seat        miles               39,520  40,049   (1.3)   77,929  78,513   (0.7)       Adjusted        consolidated PRASM        (in cents)           12.49   11.91    4.9     11.89   11.23    5.9                         CONSOLIDATED NOTES (UNAUDITED)                      Three Months Ended         Six Months Ended                          June 30,       %          June 30,         %                       2008      2007  Change   2008      2007     Change    [c] RASM (In        millions)       Mainline       Consolidated        operating        revenues     $5,371    $5,213     3.0  $10,082    $9,586     5.2       Less:        Passenger -        Regional        Affiliates     (797)     (804)   (0.9)  (1,512)   (1,479)    2.2       Mainline        operating        revenues     $4,574    $4,409     3.7   $8,570    $8,107     5.7       Mainline        available        seat miles   35,394    35,875    (1.3)  69,922    70,410    (0.7)       Mainline        RASM        (in cents)    12.92     12.29     5.1    12.26     11.51     6.5        Consolidated       Consolidated        operating        revenues     $5,371    $5,213     3.0  $10,082    $9,586     5.2       Add: Mileage        Plus - effect        of accounting        change           42        46    (8.7)     107       181   (40.9)       Less: Mileage        Plus - effect        of expiration        period change     -       (47) (100.0)       -       (75) (100.0)       Adjusted        consolidated        operating        revenues     $5,413    $5,212     3.9  $10,189    $9,692     5.1       Consolidated        available        seat miles   39,520    40,049    (1.3)  77,929    78,513    (0.7)       Adjusted        consolidated        RASM        (in cents)    13.70     13.01     5.3    13.07     12.34     5.9    [d] Operating       Margin       (In millions)       Consolidated        operating        earnings        (loss)      $(2,694)     $537       -  $(3,135)     $445       -       Add (less):        impairments        and other        charges       2,607         -       -    2,613       (22)      -       Adjusted        operating        earnings        (loss)         $(87)     $537       -    $(522)     $423       -       Consolidated        operating        revenues     $5,371    $5,213     3.0  $10,082    $9,586     5.2       Operating        margin        (loss)        (percent)     (50.2)     10.3 (60.5) pt. (31.1)      4.6 (35.7) pt.       Adjusted        operating        margin (loss)        (percent)      (1.6)     10.3 (11.9) pt.  (5.2)      4.4  (9.6) pt.    [e] Pre-tax       income (loss)       (In millions)       Earnings (loss)        before income        taxes and        equity in        earnings of        affiliates  $(2,759)     $465       -  $(3,301)     $228       -       Add (less):        impairments        and other        charges       2,607         -       -    2,613       (22)      -       Adjusted        pre-tax        earnings        (loss)        $(152)     $465       -    $(688)     $206       -       Pre-tax        earnings        (loss)        (percent)     (51.4)      8.9 (60.3) pt. (32.7)      2.4 (35.1) pt.       Adjusted        pre-tax        earnings        (loss)        (percent)      (2.8)      8.9 (11.7) pt.  (6.8)      2.1  (8.9) pt.    [f] Net income (loss)       (In millions)       Net income        (loss)      $(2,729)     $274       -  $(3,266)     $122       -       Add (less):        impairments        and other        charges       2,607         -       -    2,613       (22)      -       Add (less):        income tax        expense (i)     (29)        -       -      (29)       10       -       Adjusted net        income (loss) $(151)     $274       -    $(682)     $110       -    [g] CASM (In        millions)       Mainline       Consolidated        operating        expenses     $8,065    $4,676    72.5  $13,217    $9,141    44.6       Less: Regional        affiliates    (847)     (733)    15.6  (1,626)   (1,425)    14.1       Mainline        operating        expenses     $7,218    $3,943    83.1  $11,591    $7,716    50.2       Mainline        available seat        miles        35,394    35,875    (1.3)  69,922    70,410    (0.7)       Mainline CASM        (in cents)    20.39     10.99    85.5    16.58     10.96    51.3        Mainline        operating        expenses     $7,218    $3,943    83.1  $11,591    $7,716    50.2       Add (less):        impairments and        other special        items        (2,607)        -       -   (2,613)       22       -       Adjusted        mainline        operating        expense      $4,611    $3,943    16.9   $8,978    $7,738    16.0       Adjusted        mainline        CASM        (in cents)    13.03     10.99    18.6    12.84     10.99    16.8        Adjusted        mainline        operating        expense      $4,611    $3,943    16.9   $8,978    $7,738    16.0       Less: mainline        fuel expense (1,848)   (1,206)   53.2   (3,423)   (2,247)   52.3       Less: cost of        third party        sales -        UAFC (ii)        (3)      (11)  (72.7)     (3)       (34)  (91.2)       Adjusted        mainline        operating        expense      $2,760    $2,726     1.2   $5,552    $5,457     1.7       Adjusted        mainline CASM        (in cents)     7.80      7.60     2.6     7.94      7.75     2.5                          CONSOLIDATED NOTES (UNAUDITED)                             Three Months Ended      Six Months Ended                                 June 30,       %       June 30,        %                              2008     2007  Change   2008     2007   Change       Consolidated       Consolidated        operating expenses    $8,065  $4,676   72.5  $13,217  $9,141    44.6       Add (less):        impairments and         other charges        (2,607)    -        -   (2,613)     22       -       Adjusted        consolidated        operating expenses    $5,458  $4,676   16.7  $10,604  $9,163    15.7       Consolidated        available seat        miles                 39,520  40,049   (1.3)  77,929  78,513    (0.7)       Adjusted consolidated        CASM (in cents)        13.81   11.68   18.2    13.61   11.67    16.6        Consolidated        operating expenses    $5,458  $4,676   16.7  $10,604  $9,163    15.7       Less:  fuel expense        and UAFC(ii)          (2,206) (1,441)  53.1   (4,059) (2,699)   50.4       Adjusted        consolidated        operating expenses    $3,252  $3,235    0.5   $6,545  $6,464     1.3       Adjusted        consolidated CASM        (in cents)              8.23    8.08    1.9     8.40    8.23     2.1    [h] Operating expenses (In        millions)       Consolidated        operating expenses    $8,065  $4,676   72.5  $13,217  $9,141    44.6       Add (less):        impairments and         other charges        (2,607)    -      -     (2,613)     22    -       Adjusted operating        expenses              $5,458  $4,676   16.7  $10,604  $9,163    15.7    [i] Operating cash flow (In        millions)       Operating cash flow      $217  $1,034  (79.0)    $137  $1,660   (91.7)       Less: capital        expenditures            (131)    (78)  67.9     (232)   (146)   58.9       Add: proceeds from         litigation on         advance deposits         41       -      -       41       -       -       Free cash flow           $127    $956  (86.7)    $(54) $1,514  (103.6)    [j] Loss per share (basic        and diluted)       Loss per share -        GAAP                 $(21.47)                $(26.33)       Add:  impairments        and other charges      20.28                   20.82       Loss per share -        excluding         impairment and         other charges        $(1.19)                 $(5.51)    (i)  For the six months ended June 30, 2007, the income tax adjustment for        special items is the difference in the income tax provision on actual        net income (loss) and the income tax provision on adjusted net income        (loss), computed using an effective tax rate of 47%. The Company did        not record a tax benefit on the impairments and special items in the        2008 period, except for $29 million of tax benefits related to the        intangible asset impairments, which was calculated using a 36% tax        rate.   (ii) Included in UAL's operating expenses are the expenses of United's        wholly-owned subsidiary United Aviation Fuels Corporation ("UAFC").        UAFC's expenses are not derived from mainline jet operations;        therefore, UAL has excluded these expenses from the above reported        GAAP financial measures.    NM - Not meaningful.    (6) The table below sets forth the estimated exit-related and fresh-start       reporting impacts on the Company's results of operations.                                             2008 Increase (Decrease)      (In millions)                       YTD        2Q       1Q      Revenue impact:                   Estimate  Estimate  Estimate       Mileage Plus revenue              $(107)     $(42)     $(65)       [a]       Operating expense impact:      Share-based compensation             18         7        11        [b]      Mileage Plus marketing expense        7         2         5        [a]      Postretirement welfare cost          28        14        14        [c]      Depreciation and amortization        20        10        10        [d]      Deferred gain                        36        18        18        [e]      Total operating expense impact      109        51        58       Non-operating expense impact:      Non-cash and fresh-start interest       expense                             $8        $4        $4        [f]    [a] In connection with its emergence from Chapter 11 protection effective       February 1, 2006, the Company adopted fresh-start reporting.       Accordingly, the Company elected to change its accounting policy from       an incremental cost basis to a deferred revenue model to measure the       obligation for the Mileage Plus Frequent Flyer program. Adjustments to       the obligation are recorded to operating revenues. Historically,       adjustments were based upon incremental costs and were recorded in       both operating revenues and advertising expense.        The deferred revenue model is more volatile than the incremental cost       basis. Because all miles are now accounted for under the deferred       revenue model, the amount of revenue recognized is more sensitive to       the number of miles earned and redeemed during the period than the       incremental cost basis.                          CONSOLIDATED NOTES (UNAUDITED)    [b] In accordance with the plan of reorganization, the Company implemented       stock-based compensation plans for certain management employees and       non-employee directors.  The Company adopted SFAS 123R effective       January 1, 2006 and recorded compensation expense for such plans.    [c] In accordance with fresh-start reporting, the Company revalued its       liabilities effective February 1, 2006 to fair value.  As a result,       all prior period service credits related to postretirement costs were       eliminated.    [d] In accordance with fresh-start reporting, the Company revalued its       assets to fair value effective February 1, 2006.  As a result,       definite lived intangible asset values increased substantially which       results in higher associated amortization expense.  In addition, the       value of the Company's operating property and equipment was       significantly reduced which results in lower depreciation expense.       The Company has estimated the net impact of changes in asset values at       fresh-start on net depreciation and amortization.    [e] In accordance with fresh-start reporting, the Company revalued its       liabilities effective February 1, 2006 to fair value.  As a result,       all deferred gains on aircraft sale/leasebacks were eliminated.    [f] As a result of fresh-start reporting, the Company recognizes certain       non-cash interest expenses, including the amortization of       mark-to-market discounts on all debt and capital leases.     (7) The following table presents additional detail on the Mileage Plus       impacts summarized in the table above. These items consist of the       additional amount of revenue that the Company estimates would have       been recognized had we continued to apply the incremental cost method       of accounting after exiting bankruptcy and, for 2007, the estimated       impact of the change in the expiration period for inactive accounts       from 36 months to 18 months.  The Company utilizes this adjustment for       comparison of its performance to its peers, as certain of our peers       currently still apply the incremental cost method of accounting.                                             Increase (Decrease)                                    2008                    2007     (In millions)           YTD    2Q    1Q     YTD    4Q    3Q    2Q    1Q     Mainline     Effect of accounting      change                (89)   (35)   (54)  (230)  (50)  (30)  (37) (113)     Effect of expiration      period change           -     -     -      204   100    42    39    23     Total Mainline         (89)   (35)   (54)   (26)   50    12     2   (90)      Regional Affiliates     Effect of accounting      change                (18)    (7)   (11)   (47)  (11)   (5)   (9)  (22)     Effect of expiration      period change           -     -     -       42    21     8     8     5     Total Regional      Affiliates            (18)    (7)   (11)    (5)   10     3    (1)  (17)      Consolidated     Effect of accounting      change               (107)   (42)   (65)  (277)  (61)  (35)  (46) (135)     Effect of expiration      period change           -     -     -      246   121    50    47    28     Total Consolidated    (107)   (42)   (65)   (31)   60    15     1  (107)                          CONSOLIDATED NOTES (UNAUDITED)    (8) Pursuant to SEC Regulation G, the Company has included the following       reconciliation of reported non-GAAP financial measures to comparable       financial measures reported on a GAAP basis. Further, the Company       believes that excluding fuel costs from certain measures is useful to       investors because it provides an additional measure of management's       performance excluding the effects of a significant cost item over       which management has limited influence.  The Company also believes       that adjust



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