Edgar Filing: UAL CORP /DE/

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

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Check the appropriate box:
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Section240.14a-12

UAL CORPORATION
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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[UAL CORPORATION LOGO]

March 22, 2001
DEAR FELLOW OWNER:

The year 2000 was a difficult one for United as well as the industry.
Despite these challenges, we were able to make several significant strategic
moves that we believe will profoundly shape our company's future.

Our biggest news was our announcement of our intention to acquire US
Airways, a move that will enable us to provide customers with greater access and
more convenient travel opportunities, as well as address the weak link of our
otherwise prominent U.S. domestic network. We also launched United NewVentures,
a subsidiary of UAL Corporation, which is allowing us to harness considerable
e-commerce opportunities and at the same time improve customer service. We made
significant developments in the products we offer our premium customers, and we
saw Star Alliance grow to give our customers even greater worldwide access.

As part of our initiative to return cash to stockholders, we declared and
paid dividends under our new dividend program.

In addition, we resolved five of the labor contracts that became amendable
with the end of the Employee Stock Ownership Plan allocation period in 2000, and
contained costs through our successful fuel hedging program and strategic
adjustments to our fleet plan. We continue to work towards a successful
conclusion to contract discussions with other key segments of our represented
employees. 2000 was not an easy year, but I believe it will be remembered as the
year United rose above its challenges and set the course for our successful
future.

On behalf of the Board of Directors, I'm pleased to invite you to the 2001
Annual Meeting of Stockholders. A notice of the 2001 annual meeting and proxy
statement follows. You will also find your proxy or voting direction card and
the 2000 annual report. I am pleased to inform you that you have three ways to
vote your proxy or voting direction card.

1. VOTE BY INTERNET at HTTP://WWW.COMPUTERSHARE.COM/US/PROXY

2. VOTE BY PHONE by using the 1-888 number on your proxy or voting
direction card

3. VOTE BY MAIL, by signing and dating the proxy or voting direction card
enclosed in this package and returning it in the postage paid envelope
that is provided

Your vote is important. Please take a moment now to vote, even if you plan
to attend the meeting. I encourage you to use the "vote by Internet" option.

Sincerely,

/s/ James E. Goodwin
James E. Goodwin

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT

DATE: Thursday, May 17, 2001
TIME: 10:00 a.m.
PLACE: The Flagler Ballroom, Conference Level Two
Four Seasons Resort -- Palm Beach
2800 South Ocean Boulevard
Palm Beach, FL 33480

MATTERS TO BE VOTED ON:

1. Election of the following members of the Board of Directors:

- Five Public Directors, to be elected by holders of Common Stock

- Four Independent Directors, to be elected by holders of Class I Junior
Preferred Stock

- One ALPA Director, to be elected by holders of Class Pilot MEC Junior
Preferred Stock

- One IAM Director, to be elected by holders of Class IAM Junior Preferred
Stock

- One Salaried/Management Employee Director, to be elected by holders of
Class SAM Junior Preferred Stock

2. Ratification of appointment of independent public accountants

3. Two stockholder proposals

4. Any other matters that may be properly brought before the meeting

Francesca M. Maher
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY

Chicago, Illinois
March 22, 2001

TABLE OF CONTENTS

PAGE
--------

GENERAL INFORMATION......................................... 3
VOTING RIGHTS AND PROXY INFORMATION......................... 3
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS..................... 8
Directors to be Elected by Common Stock................... 8
Directors to be Elected by Other Classes of Stock......... 9
CERTAIN INFORMATION CONCERNING OUR BOARD OF DIRECTORS....... 12
Committees................................................ 12
Compensation Committee Interlocks and Insider
Participation; Certain Relationships and Related
Transactions............................................ 14
Director Compensation..................................... 15
BENEFICIAL OWNERSHIP OF SECURITIES.......................... 16
Certain Beneficial Owners................................. 16
Directors and Executive Officers.......................... 18
AUDIT COMMITTEE............................................. 20
General................................................... 20
Audit Committee Report.................................... 20
UAL CORPORATION RELATIVE MARKET PERFORMANCE................. 21
EXECUTIVE COMPENSATION...................................... 22
UAL Corporation Compensation and Compensation
Administration Committees Report........................ 22
Summary Compensation Table................................ 26
Option Grants in 2000..................................... 27
Aggregated Option Exercises in 2000 and FY-End Option
Values.................................................. 28
Pension Plan Table........................................ 28
Employment Contracts and Arrangements..................... 29
PROPOSAL NO. 2 -- APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS............................................... 30
Independent Accountant Fees............................... 30
PROPOSALS 3 AND 4 -- STOCKHOLDER PROPOSALS.................. 30
Proposal No. 3 Concerning Compensation of Directors....... 30
Proposal No. 4 Concerning Certain Business Combinations... 31
SUBMISSION OF STOCKHOLDER PROPOSALS......................... 32
ANNUAL REPORT............................................... 33
APPENDIX A -- AUDIT COMMITTEE CHARTER....................... A-1
APPENDIX B -- FINANCIAL INFORMATION......................... B-1

PROXY STATEMENT
GENERAL INFORMATION

This Proxy Statement is furnished to you by our Board of Directors in
connection with the solicitation of your proxy to be voted at the annual meeting
of stockholders to be held on Thursday, May 17, 2001. This proxy statement and
the proxy or voting direction card are being mailed to you approximately
March 22, 2001. "We", "our", "us" and the "company" refers to UAL Corporation.

VOTING RIGHTS AND PROXY INFORMATION

HOW DO I VOTE?

- VOTE BY INTERNET

You can vote via the Internet by logging onto WWW.COMPUTERSHARE.COM/US/PROXY
and following the prompts using your six digit control number located on your
proxy or voting direction card. This vote will be counted immediately and there
is no need to send in your proxy or voting direction card.

- VOTE BY TELEPHONE

The telephone voting procedure is simple and fast. Dial the 1-888 number on
your proxy or voting direction card and listen for further directions. You must
have a touch-tone phone in order to respond to the questions. This vote will be
counted immediately and there is no need to send in your proxy or voting
direction card.

YOU CAN SAVE OUR COMPANY MONEY IF YOU USE THE VOTE BY INTERNET OR TELEPHONE
OPTIONS.

- VOTE BY PROXY OR VOTING DIRECTION CARD

Shares eligible to be voted, and for which a properly signed proxy or
direction card is returned, will be voted in accordance with the instructions
specified on the proxy or voting direction card. If you do not mark any
instructions, your shares will be voted in favor of proposals 1 and 2 and
against proposals 3 and 4 for those stockholders holding a proxy; and in favor
of proposal 2 and against proposals 3 and 4 for those stockholders holding a
voting direction card.

WHO IS ENTITLED TO VOTE?

You are entitled to vote if our records show that you held your shares at
the close of business on March 19, 2001. This date is known as the record date
for determining who receives notice of the meeting and who is entitled to vote.

The following chart shows the number of shares of each class of our voting
stock outstanding as of the record date, the number of holders of each class as
of the record date entitled to vote at the meeting, the aggregate and per share
votes for shares of each class for all matters on which the shares vote, and the
class of directors the class is entitled to elect.

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AGGREGATE VOTES VOTING
SHARES NUMBER PER FOR
TITLE OF CLASS OUTSTANDING OF VOTES HOLDERS OF RECORD SHARE DIRECTORS
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Common Stock 52,906,442 52,906,442 23,529 1 Class elects 5
Public
Directors
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Class P ESOP Voting 6,976,997 29,893,903 1 (ESOP Trustee) 4.28 --
Junior Preferred
Stock
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Class M ESOP Voting 6,262,799 24,009,531 1 (ESOP Trustee) 3.83 --
Junior Preferred
Stock
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Class S ESOP Voting 2,517,911 10,759,995 1 (ESOP Trustee) 4.27 --
Junior Preferred
Stock
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Class Pilot MEC 1 1 1 (ALPA-MEC) 1 Class elects 1
Junior Preferred ALPA Director
Stock
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Class IAM Junior 1 1 1 (IAM) 1 Class elects 1
Preferred Stock IAM Director
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Class SAM Junior 3 3 2 (SAM Director 1 Class elects 1
Preferred Stock and Senior Vice SAM Director
President-People)
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Class I Junior 4 4 4 (Independent 1 Class elects 4
Preferred Stock Directors) Independent
Directors
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HOW DO ESOP PARTICIPANTS VOTE?

Special voting rules will apply to ESOP participants who hold voting
preferred stock through the ESOP Trustee. ESOP participants may vote by
Internet, telephone or mail. Please consult your accompanying materials for
information concerning the voting of these shares.

The P, M and S classes of ESOP voting preferred stock, held by a trust
established under a tax-qualified employee stock ownership plan (called the
qualified ESOP) that have been allocated to individual participants in the ESOP,
will be voted by participants, as named fiduciaries under the Employee
Retirement Income Security Act of 1974 on a confidential pass-through basis. The
ESOP Trustee generally is obligated to vote as instructed by the participants to
whom the voting preferred stock has been allocated, and the outstanding shares
command the entire voting power of each class of voting preferred stock. The
Class P voting preferred stock allocated to former employees who were members of
ALPA will be voted by the ESOP Trustee. The ESOP Trustee will (except as may be

required by law) vote the unallocated or otherwise unvoted shares in this
qualified ESOP in proportions directed by participants who give instructions to
the ESOP Trustee for these shares. Each participant who is an employee has the
right to give directions to the ESOP Trustee in the proportion that the
participant's allocated shares bears to the allocated shares of all participants
giving directions.

Shares held by the ESOP Trustee under a non-qualified employee stock
ownership plan (called the supplemental ESOP) will be voted as instructed by the
administrative committee appointed under the supplemental ESOP. The
administrative committee will consider the views of participants concerning the
vote, but is not required to take any particular action in response to those
views.

WHAT CLASSES OF STOCK VOTE FOR WHICH MATTERS AND WHAT IS THE VOTE REQUIRED?

The holders of common stock; the P, M and S classes of voting preferred
stock; and the Class Pilot MEC, IAM and SAM stocks will vote together as a
single class on all items at the annual meeting except the election of
directors. The presence in person or by proxy of the holders of a majority of
the total voting power of the shares of all the classes outstanding at the
record date is necessary to constitute a quorum at the meeting for all items of
business other than the election of directors. The Class I stock does not vote
on any matter other than the election of the Independent Directors (as defined
in our restated certificate of incorporation, also called our charter).

The presence in person or by proxy of the holders of a majority of the total
voting power of the outstanding shares entitled to vote on the election of a
particular class of director(s) is necessary to constitute a quorum at the
meeting for voting on that matter.

Under the Delaware General Corporation Law and our charter (1) the
affirmative vote of the holders of the shares of capital stock present in person
or by proxy at the meeting representing a plurality of the votes cast on the
matter will be required to elect the directors to be elected by the applicable
class of capital stock, and (2) the affirmative vote of the holders of the
shares of capital stock representing a majority of the votes present in person
or by proxy at the meeting and entitled to be cast on the matter will be
required to approve the other matters in this notice of meeting and proxy
statement.

HOW DO ABSTENTIONS AND BROKER NON-VOTES WORK?

Abstentions will have the effect of a vote against the matters presented for
a vote of the stockholders (other than the election of directors). This is
because abstaining shares are considered present and unvoted, which means they
have the same effect as votes against the matter. Abstentions have no effect on
the election of directors. Broker non-votes will have no effect on the outcome
of the vote on any of the matters presented for your vote and will not be
counted for purposes of establishing a quorum.

HOW DOES THE PROXY VOTING PROCESS WORK?

If the proxy card is voted properly by using the Internet or telephone
procedures specified or is properly returned by dating, signing and mailing, the
proxy will be voted at

the annual meeting in accordance with the instructions indicated by it. Our
Board does not know of any matters, other than as described in this notice of
annual meeting and proxy statement, which are to come before the annual meeting.
If a proxy is given, the persons named in the proxy will have authority to vote
in accordance with their best judgment on any other matter that is properly
presented at the meeting for action, including any proposal to adjourn or
concerning the conduct of the meeting.

If a quorum is not present at the time the annual meeting is convened for
any particular purpose, or if for any other reason we believe that additional
time should be allowed for the solicitation of proxies, we may adjourn the
meeting with your vote then present. The persons named in the proxy may vote any
shares of capital stock for which they have voting authority in favor of an
adjournment.

HOW IS MY PROXY VOTED IF I DO NOT INDICATE HOW TO VOTE?

If no instructions are indicated, proxies will be voted (1) for the election
of directors of the class on which the shares represented by the proxy are
entitled to vote, (2) for the appointment of Arthur Andersen LLP, (3) against
the stockholder proposal concerning compensation of directors, and (4) against
the stockholder proposal concerning certain business combinations.

HOW DO I REVOKE A PROXY?

Any proxy may be revoked by the person giving it at any time before it is
voted. We have not established any specified formal procedure for revoking. A
proxy may be revoked by a later proxy delivered using the Internet or telephone
voting procedures or by mail to the Secretary. A proxy may also be revoked by
written notice mailed to the Secretary. Attendance at the Annual Meeting will
not automatically revoke a proxy, but a holder of common stock in attendance may
request a ballot and vote in person, which revokes a prior granted proxy.

HOW ARE PROXIES BEING SOLICITED AND WHO PAYS SOLICITATION EXPENSES?

Proxies are being solicited by and on behalf of the Board. All expenses of
the solicitation, including the cost of preparing and mailing this proxy
statement, will be borne by us. In addition to solicitation by use of mails,
proxies may be solicited by our directors, officers and employees in person or
by telephone or other means of communication. These individuals will not be
additionally compensated, but may be reimbursed for out-of-pocket expenses
associated with solicitation. Arrangements will also be made with custodians,
nominees and fiduciaries for forwarding of proxy solicitation material to
beneficial owners of common stock and voting preferred stock held of record, and
we may reimburse these individuals for their reasonable expenses. To assure the
presence in person or by proxy of the largest number of stockholders possible,
we have engaged Georgeson Shareholder Communications Inc. to solicit proxies on
our behalf. We are paying them a proxy solicitation fee of $7,500 and
reimbursing them for reasonable out-of-pocket expenses.

WHAT DO I NEED TO GET INTO THE ANNUAL MEETING?

- SHAREHOLDERS OF RECORD

If you are a shareholder of record on March 19, 2001, you (or your duly
appointed proxy holder) are entitled to vote and attend the meeting. Certain
procedures have been adopted to ensure that no inconvenience or delays are
caused to the company's shareholders when entering the meeting.

If you are a record holder and do not have an admittance card with you at
the meeting, you will be admitted upon verification of ownership at the
shareholder's registration desk. The admission ticket is located on the lower
portion of your proxy or voting direction card.

- SHAREHOLDERS THROUGH INTERMEDIARIES

Persons who own stock through brokers, trustees, plans or in "street name"
and not directly through ownership of stock certificates are considered
beneficial owners. Beneficial owners of record on March 19, 2001 can obtain
admittance cards only at the shareholder's registration desk by presenting
evidence of common stock ownership. This evidence could be a proxy from the
institution that is the record holder of the stock or your most recent bank or
brokerage firm account statement that includes the record date, along with
proper identification.

Requests for proxies or voting direction from brokers, trustees or
fiduciaries should be processed as described in the accompanying materials.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

Except where you withhold authority, your proxy will be voted at our 2001
Annual Meeting of Stockholders or any adjournments or postponements for the
election of the nominee(s) named below for a term of one year and until their
successors are duly elected and qualified. Incumbent directors will hold office
until the Annual Meeting and until their successors are elected and qualified,
subject to the director's earlier death, retirement or removal. Our Board of
Directors expects all nominees named below to be available for election.

DIRECTORS TO BE ELECTED BY COMMON STOCK

PUBLIC DIRECTORS

Five Public Directors are to be elected by the holders of common stock, par
value $.01 per share. Each nominee was previously elected by the holders of the
common stock (other than Mr. Farrell) and has served continuously as a public
director since the date of his election. The term Public Director is used as
defined in our charter.

If a nominee unexpectedly becomes unavailable before election, proxies from
holders of common stock will be voted for the person designated by the Board or
the appropriate board committee as required by our charter. No person other than
our directors is responsible for the naming of nominees.

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(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
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Rono J. Dutta (1) President (1999) of the company and its 49 1999
wholly owned subsidiary, United Air Lines,
Inc. Senior Vice President -- Planning
(1994-1999).
(2) Trustee, The Marsico Investment Fund
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James E. Goodwin (1) Chairman and Chief Executive Officer (1999), 56 1998
President and Chief Operating Officer (1998)
of the company and United. Senior Vice
President -- North America (1995-1998).
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W. James Farrell (1) Chairman (1996) and Chief Executive Officer 58 --
(1995), Illinois Tools Works, Inc.
(manufacturing and marketing of engineered
components).
(2) Director, Allstate Insurance Company,
Illinois Tool Works, Inc., The Quaker Oats
Company and Sears, Roebuck & Co.
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(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
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James J. O'Connor (1) Chairman and Chief Executive Officer, Unicom 64 1984
Corporation (1994-1998) (holding company) and
its wholly owned subsidiary, Commonwealth
Edison Company (1980-1998) (supplier of
electricity).
(2) Director, Corning Incorporated, Smurfit-Stone
Container Corporation and Tribune Company.
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Paul E. Tierney, Jr. (1) General Partner, Darwin Capital Partners 58 1990
(investment management) (1999) and Managing
Member, Development Capital, LLC (investment
management) (1997). Managing Director,
Gollust, Tierney and Oliver, Inc. (investment
banking) (1992-1996)
(2) Director, Liz Claiborne, Inc.
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DIRECTORS TO BE ELECTED BY OTHER CLASSES OF STOCK

The following classes of directors are to be elected by the holder of
certain classes of our stock other than common stock. THE HOLDERS OF COMMON
STOCK DO NOT VOTE ON THE ELECTION OF THESE DIRECTORS. Each nominee was
previously elected by the holders of the applicable class of our stock and has
served continuously as a director since the first date of his or her election.
If a nominee unexpectedly becomes unavailable before election, or we are
notified that a substitute nominee has been selected, votes will be cast
pursuant to the authority granted by the proxies from the respective holder(s)
for the person who may be designated as a substitute nominee.

INDEPENDENT DIRECTORS -- ELECTED BY HOLDERS OF CLASS I STOCK

Four Independent Directors are to be elected by the four Independent
Directors as the holders of our Class I stock. The Independent Director
Nomination Committee has nominated each nominee and under a stockholders
agreement among the holders of Class I stock, ALPA, the IAM and us, each holder
has agreed to vote in favor of the nominees. No person, other than the
Independent Director Nomination Committee, is responsible for the naming of
nominees.

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(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
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John W. Creighton, Jr. (1) Retired Chief Executive Officer and 68 1998
President (1997), Weyerhaeuser Company
(forest products). President
(1988-1997) and Chief Executive Officer
(1991-1997), Weyerhaeuser.
(2) Chairman, Unocal Corporation.
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(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
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Richard D. McCormick (1) Chairman Emeritus (1999) and Chairman 60 1994
(1992-1999), US WEST, Inc.
(telecommunications). President
(1986-1998) and Chief Executive Officer
(1991-1998), US WEST.
(2) Director, Wells Fargo & Company and
United Technologies Corporation.
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Hazel R. O'Leary (1) President and Chief Operating Officer 63 1999
(2000), Blaylock & Partners (investment
banking). President (1997-2000),
O'Leary & Associates (energy services
and investment strategy). Secretary
(1993-1997), U.S. Department of Energy
(government).
(2) Director, The AES Corporation
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John K. Van de Kamp (1) President, Thoroughbred Owners of 65 1994
California (trade association) (1996).
Of Counsel, Dewey Ballantine (law firm)
for the past five years.
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ALPA DIRECTOR -- ELECTED BY CLASS PILOT MEC STOCK

One ALPA Director (as defined in our charter) is to be elected by the United
Airlines Pilots Master Executive Council, ALPA, the holder of our Class Pilot
MEC stock. The ALPA-MEC has nominated and intends to re-elect Frederick C.
Dubinsky as the ALPA Director.

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(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
---------------------------------------------------------------------------------------------------
Frederick C. Dubinsky (1) Chairman, ALPA-MEC (labor union) (2000). 58 2000
Captain, B747-400, United, for the past
five years.
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IAM DIRECTOR -- ELECTED BY CLASS IAM STOCK

One IAM Director (as defined in our charter) is to be elected by the
International Association of Machinists and Aerospace Workers, the holder of our
Class IAM stock. The IAM has nominated and intends to re-elect John F. Peterpaul
as the IAM Director.

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(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
---------------------------------------------------------------------------------------------------
John F. Peterpaul (1) Retired General Vice President, IAM (labor 65 1994
union), for the past five years.
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SALARIED/MANAGEMENT EMPLOYEE DIRECTOR--ELECTED BY CLASS SAM STOCK

One Salaried/Management Employee Director (as defined in our charter) is to
be elected by the holders of our Class SAM stock, who are Deval L. Patrick, the
Salaried/ Management Employee Director, and William P. Hobgood, our Senior Vice
President-People. Mr. Patrick has been nominated for re-election by the "System
Roundtable," a body of salaried and management employees of United empowered to
review issues relating to us and how those issues effect the salaried and
management employees. Under a stockholders agreement among the holders of Class
SAM stock and us, each holder has agreed to vote in favor of the System
Roundtable nominee.

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(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
---------------------------------------------------------------------------------------------------
Deval L. Patrick (1) Executive Vice President and General 44 1997
Counsel, The Coca Cola Company, Inc.
(beverage company) (4/1/01). Vice President
& General Counsel, Texaco Inc. (oil/energy
company) (1999-3/31/01). Partner, Day,
Berry & Howard (law firm) (1997-1999).
Assistant Attorney General, Civil Rights
Division, U.S. Department of Justice (law
enforcement) (1994-1997).
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CERTAIN INFORMATION CONCERNING OUR BOARD OF DIRECTORS

Our Board of Directors held a total of 10 meetings in 2000. All directors
attended 75 percent or more of the board meetings and board committee meetings
of which they were members.

COMMITTEES

The Board of Directors has Executive, Audit, Compensation, Compensation
Administration, CAP, Labor, Independent Director Nomination, Outside Public
Director Nomination, Pension and Welfare Plans Oversight and Transaction
Committees. Below is a brief description of the functions performed, the number
of meetings held and the names of committee members.

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MEETINGS IN
NAME AND FUNCTIONS OF COMMITTEE 2000
----------------------------------------------------------------------------
EXECUTIVE 2

- authorized to exercise the powers of the Board in
management of our business and affairs, with certain
exceptions
- responsible for safety and security oversight for United
- reviews Board effectiveness and oversees compensation
arrangements for non-employee directors
- administers the directors plan
- reviews management succession planning for certain senior
positions
- acts as a search committee and recommends to Board
appointment of a successor CEO (requires four votes,
excluding Mr. Goodwin)
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AUDIT 2

- reviews and discusses with management and independent
auditors our annual financial statements prior to
publication, financial reporting practices and results of
annual external audit
- reviews work of the independent auditors, scope of annual
external audit and the auditor's independence
- makes annual recommendations to our Board for appointment
of independent public accountants for the coming year
- reviews the effectiveness of our financial and accounting
functions, organization, operations and management and
adequacy of internal accounting controls
- reviews major accounting policies and significant
judgments affecting the financial statements
- establishes and reviews the adequacy of our code of
business conduct and corporate compliance programs
- reviews and reassesses adequacy of this committee's
charter on an annual basis
----------------------------------------------------------------------------

----------------------------------------------------------------------------

MEETINGS IN
NAME AND FUNCTIONS OF COMMITTEE 2000
----------------------------------------------------------------------------
COMPENSATION 7

- reviews and approves compensation and benefits of our
officers
- reviews general policy matters relating to compensation
and benefits of our non-union employees
- administers our equity incentive compensation plans,
except for responsibilities reserved for the Compensation
Administration Committee
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COMPENSATION ADMINISTRATION 7

- administers our stock option plans and executive
compensation programs to the extent these functions cannot
or are not appropriate to be performed by the Compensation
Committee in light of any provision of the Internal
Revenue Code, securities laws or other applicable laws or
regulations
----------------------------------------------------------------------------
CAP 1

- oversees implementation of our Competitive Action Plan to
improve United's competitiveness on short-haul routes
under which United Shuttle-Registered Trademark- was
established
- approves on our behalf any modifications to the
Competitive Action Plan, other than those matters reserved
to the Labor Committee
- approves modifications to Salaried and Management Employee
Investment (as defined in our charter) (vote must include
two union directors and all Outside Public Directors, as
defined in our charter)
----------------------------------------------------------------------------
LABOR 11

- reviews and approves the entering into of, and
modifications and amendments to, collective bargaining
agreements to which we are a party, with certain
exceptions
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INDEPENDENT DIRECTOR NOMINATION 2

- nominates candidates to become Independent Director
members of the Board
- fills vacancies in Independent Director positions
- appoints Independent Directors to serve on Board
Committees (nominations and appointments require vote of
majority of Independent Directors plus one union director)
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OUTSIDE PUBLIC DIRECTOR NOMINATION 6

- nominates candidates to become Outside Public Director
members of the Board
- fills vacancies in Outside Public Director position
- appoints Outside Public Directors to serve on Board
Committees
----------------------------------------------------------------------------

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MEETINGS IN
NAME AND FUNCTIONS OF COMMITTEE 2000
----------------------------------------------------------------------------
PENSION AND WELFARE PLANS OVERSIGHT 2

- oversees our compliance with laws governing employee
benefit plans that we maintain
----------------------------------------------------------------------------
TRANSACTION 0

- evaluates and advises the Board on any proposed merger or
consolidation of us with or into, the sale, lease or
exchange of all or substantially all of our property or
assets to, or a significant business transaction with, any
Labor Affiliate (as defined in our charter)
----------------------------------------------------------------------------

COMMITTEE MEMBERSHIP

OUTSIDE
INDEPENDENT PUBLIC
COMP DIRECTOR DIRECTOR
AUDIT CAP COMP ADMIN EXECUTIVE NOMINATION LABOR NOMINATION

------------------------------------------------------------------------------------------------------------------
John W. Creighton,
Jr. x x x Ch x
------------------------------------------------------------------------------------------------------------------
Frederick C. Dubinsky x x x x
------------------------------------------------------------------------------------------------------------------
Rono J. Dutta
------------------------------------------------------------------------------------------------------------------
James E. Goodwin x x Ch Ch
------------------------------------------------------------------------------------------------------------------
Richard D. McCormick x Ch Ch x x
------------------------------------------------------------------------------------------------------------------
John F. McGillicuddy x x x x
------------------------------------------------------------------------------------------------------------------
James J. O'Connor x x x x Ch
------------------------------------------------------------------------------------------------------------------
Hazel R. O'Leary x x x
------------------------------------------------------------------------------------------------------------------
Deval L. Patrick x x
------------------------------------------------------------------------------------------------------------------
John F. Peterpaul x x x x
------------------------------------------------------------------------------------------------------------------
Paul E. Tierney, Jr. Ch x x x
------------------------------------------------------------------------------------------------------------------
John K. Van de Kamp x Ch x x

COMMITTEE MEMBERSHIP
PENSION
&
WELFARE
PLANS
OVERSIGHT TRANSACTION

John W. Creighton,
Jr. x
----------------------------------------------------------
Frederick C. Dubinsky x
-----------------------------------------------------------------------
Rono J. Dutta x
------------------------------------------------------------------------------------
James E. Goodwin
-------------------------------------------------------------------------------------------------
Richard D. McCormick x x
--------------------------------------------------------------------------------------------------------------
John F. McGillicuddy Ch
------------------------------------------------------------------------------------------------------------------
James J. O'Connor x x
------------------------------------------------------------------------------------------------------------------
Hazel R. O'Leary x x
------------------------------------------------------------------------------------------------------------------
Deval L. Patrick Ch
------------------------------------------------------------------------------------------------------------------
John F. Peterpaul x
------------------------------------------------------------------------------------------------------------------
Paul E. Tierney, Jr. x
------------------------------------------------------------------------------------------------------------------
John K. Van de Kamp x x

--------------------------------------------------------------------------------

Key: x = Current Committee Assignment

Ch = Chairman
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Goodwin and Capt. Dubinsky serve on the Compensation Committee, but not
the Compensation Administration Committee. Mr. Goodwin and Capt. Dubinsky are
employees of ours. Capt. Dubinsky is also the Chairman of the ALPA-MEC and an
officer of ALPA. ALPA and we are parties to a collective bargaining agreement
for our pilots represented by ALPA.

DIRECTOR COMPENSATION

We do not pay directors who are employees of the company additional
compensation for their services as directors. In 2000, compensation for
non-employee directors included the following:

- annual retainer of $18,000

- $900 for each board and board committee meeting attended

- annual retainer of $2,700 to committee chairmen (other than chair of
Compensation Administration Committee)

- expenses of attending board and committee meetings

- 400 shares of common stock each year

- 189 deferred stock units representing common stock each year

Under our stock ownership guidelines, our directors are to keep the 400
shares while they are on the Board. They may also elect to receive some or all
of their cash retainers and fees in common stock, as well as defer their stock
and cash compensation for tax purposes. The deferred stock units are unfunded
and are not settled until after he or she leaves the Board.

We consider it important for our directors to understand our business and
have exposure to our operations and employees. For this reason, we provide free
transportation and free cargo shipment on United to our directors and their
spouse and eligible dependent children. We reimburse our directors for income
taxes resulting from actual use of the travel and shipment privileges. A
director who retires from the Board with at least five years of company
creditable service will receive free travel and cargo benefits for life, subject
to certain exceptions.

The cost of this policy in 2000 for each director, including cash payments
made in January 2001 for income tax liability, was as follows:

---------------------------------------------------------------------------------------

NAME COST($) NAME COST($)
---------------------------------------------------------------------------------------
John W. Creighton, Jr. 6,889 James J. O'Connor 47,217
---------------------------------------------------------------------------------------
Frederick C. Dubinsky 51,003 Hazel R. O'Leary 2,124
---------------------------------------------------------------------------------------
Rono J. Dutta 41,253 Deval L. Patrick 63,958
---------------------------------------------------------------------------------------
James E. Goodwin 1,688 John F. Peterpaul 8,393
---------------------------------------------------------------------------------------
Richard D. McCormick 51,967 Paul E. Tierney, Jr. 75,906
---------------------------------------------------------------------------------------
John F. McGillicuddy 25,155 John K. Van de Kamp 31,338
---------------------------------------------------------------------------------------

BENEFICIAL OWNERSHIP OF SECURITIES

CERTAIN BENEFICIAL OWNERS

The following table shows the number of shares of our voting securities
owned by any person or group known to us as of March 19, 2001, to be the
beneficial owner of more than 5% of any class of our voting securities.

---------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
AMOUNT AND VOTING POWER
NATURE OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OF BENEFICIAL PERCENT OF FOR PROPOSALS
OWNER TITLE OF CLASS OWNERSHIP(1) CLASS 2-4
---------------------------------------------------------------------------------------------------------------------------------
State Street Bank and Trust Common Stock 55,711,524(2) 51.8% --
Company, Trustee Class P ESOP Voting 6,633,389(2) 100% 25.4%
225 Franklin Street Junior Preferred Stock
Boston, MA 02110 Class M ESOP Voting 5,920,671(2) 100% 20.4%
Junior Preferred Stock
Class S ESOP Voting 2,435,175(2) 100% 9.2%
Junior Preferred Stock
---------------------------------------------------------------------------------------------------------------------------------
AXA Conseil Vie Assurance Mutuelle Common Stock 14,950,040(3) 28.7% 12.9%
100-101 Terrasse Boieldieu
92042 Paris La Defense France

AXA Assurances I.A.R.D. Mutuelle &
AXA Assurances Vie Mutuelle
21, rue de Chateaudun
75009 Paris France

AXA Courtage Assurance Mutuelle
26, rue Louis le Grand
75002 Paris France

AXA
25, avenue Matignon
75008 Paris France

AXA Financial, Inc.
1290 Avenue of the Americas
New York, NY 10104
---------------------------------------------------------------------------------------------------------------------------------
PRIMECAP Management Company Common Stock 3,850,720(4) 7.73% 3.5%
225 South Lake Avenue, Suite 400
Pasadena, CA 91101
---------------------------------------------------------------------------------------------------------------------------------
Capital Group International, Inc. Common Stock 3,137,190(5) 6% 2.7%
11100 Santa Monica Blvd.
Los Angeles, CA 90025
---------------------------------------------------------------------------------------------------------------------------------
State Board of Administration of Common Stock 2,862,275(6) 5.49% 2.5%
Florida, Florida Retirement System
1801 Hermitage Blvd., Suite 100
P.O.Box 13300
Tallahassee, FL 32317-3300
---------------------------------------------------------------------------------------------------------------------------------
United Airlines Pilots Master Class Pilot MEC Junior 1 100% --
Executive Council Preferred Stock
Air Line Pilots Association,
International
6400 Shafer Court, Suite 700
Rosemont, IL 60018
---------------------------------------------------------------------------------------------------------------------------------

International Association of Class IAM Junior 1 100% --
Machinists and Aerospace Workers Preferred Stock
District #141
9000 Machinists Place
Upper Marlboro, MD 20722
---------------------------------------------------------------------------------------------------------------------------------
Deval L. Patrick Class SAM Junior 2 66.67% --
UAL Corporation Preferred Stock
P.O. Box 66919
Chicago, IL 60666
---------------------------------------------------------------------------------------------------------------------------------
William P. Hobgood Class SAM Junior 1 33.33% --
Senior Vice President-People Preferred Stock
United Airlines
P.O. Box 66100
Chicago, IL 60666
---------------------------------------------------------------------------------------------------------------------------------
John W. Creighton, Jr. Class I Junior 1 25% --
1000 Second Avenue Preferred Stock
Suite 3700
Seattle, WA 98104
---------------------------------------------------------------------------------------------------------------------------------
Richard D. McCormick Class I Junior 1 25% --
US WEST, Inc. Preferred Stock
3200 Cherry Creek South Drive
Denver, CO 80209
---------------------------------------------------------------------------------------------------------------------------------
Hazel R. O'Leary Class I Junior 1 25% --
Blaylock & Partners Preferred Stock
609 5th Avenue
New York, NY 10017
---------------------------------------------------------------------------------------------------------------------------------
John K. Van de Kamp Class I Junior 1 25% --
Dewey Ballantine Preferred Stock
333 S. Hope Street
Los Angeles, CA 90071-3003
---------------------------------------------------------------------------------------------------------------------------------

(1) Shares of Class Pilot MEC, Class IAM and Class SAM stock elect one ALPA, IAM
and Salaried/Management Employee Director, respectively, and have one vote
on all matters submitted to the holders of common stock other than the
election of directors. Shares of Class I stock elect four Independent
Directors and do not vote on other matters except as required by law.

(2) Based on Schedule 13G dated February 12, 2001, in which reporting person
reported that (1) as trustee under the ESOP, it had shared voting power over
6,633,389 shares of Class P ESOP Voting Junior Preferred Stock representing
25.4% of our voting power, 5,920,671 shares of Class M ESOP Voting Junior
Preferred Stock representing 20.4% of our voting power, and 2,435,175 shares
of Class S ESOP Voting Junior Preferred Stock (Class P, M and S voting
stocks referred to as the voting preferred stocks) representing 9.2% of our
voting power, and shared dispositive power over 12,218,682 shares of

Class 1 ESOP Convertible Preferred Stock and 1,520,606 shares of Class 2
ESOP Convertible Preferred Stock, each convertible into quadruple that
number of shares of common stock, as well as 5,995 shares of common stock
issuable upon conversion of the voting preferred stocks, and (2) as trustee
acting in various fiduciary capacities, it had sole dispositive power over
404,498 shares of common stock, shared dispositive power over 891 shares,
sole voting power for 336,167 shares and shared voting power over 6,817
shares. The reporting person disclaims beneficial ownership of all shares
reported. Voting power of voting preferred stocks is limited to matters
other than the vote for directors.

(3) Based on Schedule 13G/A (Amendment No. 15) dated February 12, 2001, in which
AXA Conseil Vie Assurance Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA
Assurances Vie Mutuelle, and AXA Courtage Assurance Mutuelle, as a group,
AXA and AXA Financial, Inc. reported sole voting power for 3,650,540 shares,
shared voting power for 7,216,200 shares and sole dispositive power for
14,950,040 shares.

(4) Based on Schedule 13G dated March 31, 2000, in which reporting person
reported sole voting power for 120,720 shares and sole dispositive power for
3,850,720 shares.

(5) Based on Schedule 13G dated February 9, 2001, in which reporting person
reported sole voting power for 3,077,290 shares and sole dispositive power
for 3,137,190 shares.

(6) Based on Schedule 13G dated February 6, 2001, in which reporting person
reported sole voting and dispositive power for 2,862,275 shares.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the number of shares of common stock and of
voting preferred stock held in the ESOP owned as of March 19, 2001, by our
directors, and executive officers included in the Summary Compensation Table,
and by our directors and executive officers as a group. Unless we say otherwise
in a footnote, the owner exercises sole voting and investment power over the
securities (other than unissued securities which ownership we have imputed to
the owner). Some of our directors and executive officers also own shares of
other classes of our preferred stock as shown in the table above.

-----------------------------------------------------------------------------------------------------

COMMON STOCK
NAME OF DIRECTOR OR BENEFICIALLY PERCENT VOTING PREFERRED STOCK
EXECUTIVE OFFICER AND GROUP OWNED(1) OF CLASS BENEFICIALLY OWNED(2)
-----------------------------------------------------------------------------------------------------
John W. Creighton, Jr. 6,075 * 0
-----------------------------------------------------------------------------------------------------
Frederick C. Dubinsky 5,712 * 1,428
-----------------------------------------------------------------------------------------------------
Rono J. Dutta 179,528 * 1,415
-----------------------------------------------------------------------------------------------------
W. James Farrell 0 * 0
-----------------------------------------------------------------------------------------------------
James E. Goodwin 390,820 * 1,897
-----------------------------------------------------------------------------------------------------
Richard D. McCormick 8,979 * 0
-----------------------------------------------------------------------------------------------------
John F. McGillicuddy 9,046 * 0
-----------------------------------------------------------------------------------------------------
James J. O'Connor 8,599 * 0
-----------------------------------------------------------------------------------------------------
Hazel R. O'Leary 1,517 * 0
-----------------------------------------------------------------------------------------------------
Deval L. Patrick 3,940 * 0
-----------------------------------------------------------------------------------------------------
John F. Peterpaul 3,837 * 0
-----------------------------------------------------------------------------------------------------
Paul E. Tierney, Jr. 39,432 * 0
-----------------------------------------------------------------------------------------------------
John K. Van de Kamp 3,893 * 0
-----------------------------------------------------------------------------------------------------
Douglas A. Hacker 303,905 * 1,798
-----------------------------------------------------------------------------------------------------
Francesca M. Maher 96,276 * 1,076
-----------------------------------------------------------------------------------------------------
Andrew P. Studdert 151,945 * 995
-----------------------------------------------------------------------------------------------------
Directors and Executive Officers
as a Group (17 persons) 1,221,323 2.3 9,000
-----------------------------------------------------------------------------------------------------

* Less than 1%

(1) This number includes (a) deferred stock units for Creighton 3,939; McCormick
6,781; McGillicuddy 6,446; O'Connor 2,799; O'Leary 1,117; Patrick 3,940;
Peterpaul 1,437; Tierney 3,616; and Van de Kamp 3,893 (which reflects
beneficial ownership of common stock represented by deferred stock units
under the UAL Corporation 1995 Directors Plan); (b) options exercisable
within 60 days of March 19, 2001 for Dutta 138,449; Goodwin 287,537; Hacker
240,249; Maher 84,475; Studdert 110,474; and for the group 866,684;
(c) common stock issuable upon conversion of ESOP preferred for Dubinsky
5,712; Dutta 5,660; Goodwin 7,588; Hacker 7,192; Maher 4,306; Studdert
3,979; and for the group 36,000 (see footnote 2); (d) for Mr. Goodwin,
10,000 held indirectly by his wife; (e) for Mr. Dutta, 88 held indirectly by
a United 401(k) plan (as of December 31, 2000); and (f) for Ms. Maher, 4,320
held indirectly by her husband.

(2) Reflects beneficial ownership through the ESOP of (a) Class P Voting Stock
for Mr. Dubinsky, and (b) Class S Voting Stock for Messrs. Dutta, Goodwin,
Hacker and Studdert and Ms. Maher, and for directors and executive officers
as a group. Represents less than 1%.

AUDIT COMMITTEE

GENERAL

Our Audit Committee is comprised of seven independent members as
independence is defined in the NYSE listing rules. Our Audit Committee has
adopted a written charter that was approved by our Board in February 2001. A
copy of this charter is included as Appendix A. The charter specifies the scope
of the Audit Committee's responsibilities and how it should carry out those
responsibilities.

AUDIT COMMITTEE REPORT

UAL CORPORATION

UAL Audit Committee Report

To the Board Of Directors of UAL Corporation:

We have reviewed and discussed with management the company's audited
financial statements as of and for the year ended December 31, 2000.

We have discussed with Arthur Andersen LLP, the company's independent
auditors, the matters required to be discussed by Statement of Auditing
Standards No. 61, COMMUNICATION WITH AUDIT COMMITTEES, as amended, by the
Auditing Standards Board of the American Institute of Certified Public
Accountants.

We have received and reviewed the written disclosures and the letter from
Arthur Andersen LLP required by Independence Standard No. 1, INDEPENDENCE
DISCUSSIONS WITH AUDIT COMMITTEES, as amended by the Independent Standards
Board, and have discussed with Arthur Andersen LLP its independence.

Based on the reviews and discussions referred to above, we recommend to the
Board of Directors that the financial statements referred to above be included
in the company's Annual Report on Form 10-K for the year ended December 31,
2000.

Paul E. Tierney, Jr., Chairman James J. O'Connor
John W. Creighton, Jr. Hazel R. O'Leary
Richard D. McCormick John K. Van de Kamp
John F. McGillicuddy

UAL CORPORATION
RELATIVE MARKET PERFORMANCE
TOTAL RETURN 1996-2000

[GRAPH]

--------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------------------------

UAL Corp 100.00 140.06 207.28 133.75 173.81 89.02
S&P 500 Index 100.00 122.96 163.98 210.85 255.21 231.98
D-J Airline Group * 100.00 110.84 184.90 180.74 177.93 251.59
--------------------------------------------------------------------------------------------------

Source: Compustat Database

------------------------

* Alaska Air, AMR, Delta, Southwest, USAirways

EXECUTIVE COMPENSATION
UAL CORPORATION COMPENSATION AND
COMPENSATION ADMINISTRATION COMMITTEES REPORT

WHAT IS THE COMPANY'S COMPENSATION PHILOSOPHY FOR 2000?

The company's executive compensation program is designed to:

- attract, retain and motivate top quality and experienced executives

- provide industry competitive compensation opportunities and

- support a pay-for-performance culture.

WHAT IS THE STRUCTURE OF THE COMPENSATION PROGRAM?

A review of the company's executive compensation programs was undertaken in
order to ensure that the program was market-competitive. As a result of this
review, a number of changes were made to the senior management compensation
program for 2000. These changes included:

- The officer compensation program in total is primarily focused on
promoting pay-for-performance and emphasizing pay-at-risk, and oriented
toward stockholder interests through the use of long-term stock-based
incentives that create a direct linkage between officer rewards and
increased stockholder value.

- Targeting each element of total compensation (i.e., base salary, annual
bonus, stock options) at median levels paid by other major industrial
corporations comparable to the company in revenue size and scope of
operations. For those executive positions deemed to be unique to the
airline industry, the company targeted the median, adjusted for size, of
the other major airlines.

- Enhancing the annual incentive program to include financial, operational,
customer satisfaction and employee satisfaction goals.

- Maximizing the tax deductibility of compensation paid to our employees
covered by Internal Revenue Code Section 162(m), with certain exceptions.

In addition, long term incentive arrangements for executives of United
NewVentures, Inc. have been established to closely align compensation with the
increased value of that business as discussed below.

WHAT WERE THE RESULT OF THESE CHANGES TO EXECUTIVES?

These changes resulted in increased base salaries, bonus opportunities (for
achieving target performance) and reduced stock option awards for most of the
executives. Nonetheless, the changes provide a competitive level of secure cash
compensation, while offering a significant level of performance-based cash and
stock incentive compensation. The overall objective of the program is to drive
improved performance that will lead to an increase in the return for all
stockholders.

In October 2000, Mr. Hacker, the company's Executive Vice President and
Chief Financial Officer, also became the President of our newly created, wholly
owned subsidiary,

United NewVentures, Inc. In connection with his dual responsibilities,
Mr. Hacker's stock option awards will be adjusted to reflect the compensation
arrangement with United NewVentures as described below.

HOW ARE BASE SALARIES DETERMINED?

With the introduction of the new executive compensation program, the
officers' base salaries were increased to make them competitive with general
industry and the airlines. These increases were the result of very minimal
changes in compensation since 1994 due to salary increase constraints
established as part of the ESOP and the reconfiguration of the new executive
compensation program.

HOW ARE BONUSES DETERMINED?

The new incentive program, which was approved by the shareholders in
May 2000, was created to support the company's strategic objectives and reward
individual performance. On an annual basis, the threshold, target and maximum
performance levels for financial, operational, customer satisfaction and
employee satisfaction goals are set. The incentive bonus payout is adjusted
based on the company's performance results for each of these goals. The
individual assessment for each executive officer is based upon, among other
things, an appraisal prepared annually on his or her overall performance in
relation to their assigned responsibilities. This assessment may be used to
adjust individual awards. The incentive program allows for the deferral, at the
participant's election, of all or a portion of his or her award in UAL common
stock or cash. A participant who elects a stock deferral is entitled to a
deferred stock credit valued at 120% of the dollar amount deferred. Deferred
stock units in excess of 100% of award value will be forfeited if the units are
withdrawn within five years of the award year.

The CEO recommends to the Compensation Committee (or the Compensation
Administration Committee for awards intended to qualify under Section 162(m) of
the Internal Revenue Code) incentive awards for each executive officer. The
awards for the executive officers are then made by the Compensation Committee
(or the Compensation Administration Committee for awards intended to qualify
under Section 162(m) of the Internal Revenue Code) based on a pre-established
formula.

In 2001 each of the executive officers received an incentive compensation
award for 2000 performance, which was granted under the performance plan terms
described above.

HOW ARE STOCK OPTIONS DETERMINED?

The stock compensation program is comprised entirely of annual stock
options. Option grants are determined in consideration of individual performance
and contribution and general industry and airline practice. The CEO recommends
stock option grants for each executive officer to the Compensation Committee (or
the Compensation Administration Committee, in the case of awards which qualify
for certain exemptions from Section 16 of the Securities Exchange Act pursuant
to Rule 16b-3 or Section 162(m) qualified grants). The Committee determines
stock awards for the CEO based upon a comparable process and makes a final
determination on stock awards for the executive officers.

Stock options may not be granted at less than fair market value on the date
of grant. Stock options carry a 10-year term and typically vest ratably over a
four-year period. The

company's stock option plan includes provisions to preserve, to the maximum
extent possible, the deductibility by the company of amounts awarded under the
plan.

The company's executive officers received a stock option grant in 2000,
subject to the company's normal vesting schedule, in full compliance with
Section 162(m) of the Internal Revenue Code. As part of the creation of United
NewVentures, a Long Term Incentive Plan (LTIP) was adopted by United NewVentures
to reward all of its employees for its share of the incremental net increase in
value of the United NewVentures asset portfolio. As a result of Mr. Hacker's
duties as President of United NewVentures and in connection with his
compensation arrangement, the value of his future stock option grants in the
company will be reduced by 50%. Under the LTIP, Mr. Hacker will receive 1% of
United NewVentures' share of the net value created of United NewVentures' asset
portfolio. Any payout under the LTIP would occur at the end of its four-year
term or earlier in the event of a public offering relating to the United
NewVentures business or other liquidating event. Payments under the LTIP will
not qualify for Section 162(m) of the Internal Revenue Code treatment.

DOES THE COMPANY USE RESTRICTED STOCK AS AN ELEMENT OF THE COMPENSATION PROGRAM?

The company has eliminated restricted stock as a component of its normal
compensation program. However, to enable the company to attract high quality
management at the most senior officer levels, sign-on compensation packages for
these officers at the time of hiring may include cash and restricted or other
stock awards in addition to compensation of the types described above. In
addition, restricted stock may be used for a limited number of United employees
in response to compelling business requirements, such as for recruitment,
retention or promotion of key management employees.

HOW HAS THE COMPANY RESPONDED TO IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION?

Section 162(m) of the Internal Revenue Code limits the tax deductibility of
compensation in excess of $1 million paid to certain executive officers, unless
the payments are made under plans that satisfy the technical requirements of the
Code.

Stock options and annual bonuses are designed so that the compensation paid
will be tax deductible to the company. The Committee believes that
performance-based pay over $1 million is sometimes required to attract and
retain executives in a competitive marketplace. The company has not paid any
non-deductible compensation in excess of $1 million. The Committee reserves the
right to determine when and if it is in the company's best interest to forego
deductibility.

DOES THE COMPANY REQUIRE ITS EXECUTIVE OFFICERS TO HOLD STOCK IN THE COMPANY?

To encourage accumulation and retention of common stock by officers,
guidelines have been adopted providing for the minimum ownership of common stock
at the following multiples of annual salary:

- Chairman and Chief Executive Officer, five times;

- President and Executive Vice Presidents, three times; and

- Senior Vice Presidents, two times.

Unexercised stock options, unvested restricted stock and ESOP stock
ownership are not recognized for purposes of these guidelines.

WHAT WAS THE BASIS FOR MR. GOODWIN'S 2000 COMPENSATION?

BASE SALARY. Under his employment agreement, Mr. Goodwin received an
increase in annual base salary to $900,000 on April 13, 2000. This increase was
awarded to reflect general industry and airline compensation for CEOs in
companies with comparable revenue, and his individual performance.

ANNUAL BONUS. Under his employment agreement, Mr. Goodwin is eligible to
receive an annual bonus, as CEO, as determined by the Compensation
Administration Committee under the company's performance incentive compensation
plan. His target bonus can be no less than 100% of the maximum percentage
permitted under the incentive plan with an additional 20% over target bonus for
superior performance that may be paid outside of the plan. Mr. Goodwin received
an incentive award in 2001 for 2000 performance, which was awarded under the
performance incentive plan terms according to the formula described above.
Mr. Goodwin's incentive award was based on two components: company performance
and individual performance consistent with the performance incentive plan
approved by shareholders in May 2000.

The company's earnings for 2000 were such that allowed for an award under
the plan subject to individual performance. In addition, the company met certain
of its employee goals and its minimum financial goal under the performance plan,
while not achieving the threshold for its operational and customer satisfaction
goals.

STOCK OPTIONS. Mr. Goodwin was granted a stock option grant in 2000 for
180,000 shares of the company's common stock that will vest at 25% over the next
four years. The value of the grant was determined to bring Mr. Goodwin's total
compensation opportunity to that which is competitive to a CEO in a similar
sized company.

DO THE COMMITTEES SEEK OUTSIDE, INDEPENDENT ADVICE ON COMPENSATION MATTERS?

The Compensation Committee and Compensation Administration Committee consult
with independent compensation advisors on executive compensation matters. The
Committees also have access to competitive data on compensation levels for
officer positions.

UAL CORPORATION COMPENSATION COMMITTEE

Richard D. McCormick, Chairman James J. O'Connor
John W. Creighton, Jr. Deval L. Patrick
Frederick C. Dubinsky John F. Peterpaul
James E. Goodwin

UAL CORPORATION COMPENSATION ADMINISTRATION COMMITTEE

Richard D. McCormick, Chairman James J. O'Connor
John W. Creighton, Jr.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------- ----------------------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(2) ($)(3) (#) ($)(4)
---------------------- -------- -------- -------- ------------ ---------- ------------ ------------

James E. Goodwin 2000 843,528 225,000 60,877 0 180,000 116,468
Chairman and Chief 1999 572,843 580,000 446 3,912,500 251,700 213,351
Executive Officer 1998 306,374 309,500 4,586 0 49,500 76,963

Rono J. Dutta 2000 556,379 118,062 39,739 0 78,000 35,670
President 1999 351,596 280,000 29,542 1,581,250 65,300 97,470

Douglas A. Hacker 2000 464,583 109,316 9,001 0 65,000 25,622
Executive Vice 1999 344,546 245,000 9,001 1,581,250 65,300 109,946
President and Chief 1998 311,449 227,400 9,001 0 32,150 85,301
Financial Officer

Andrew P. Studdert 2000 451,042 85,586 4,634 0 65,000 30,120
Executive Vice 1999 294,311 210,000 7,628 1,581,250 45,800 87,489
President and Chief 1998 240,514 186,200 6,135 0 24,150 63,809
Operating Officer

Francesca M. Maher 2000 296,745 60,477(1) 9,756 2,419(1) 26,000 19,190
Senior Vice 1999 242,338 150,000 9,592 0 42,100 74,768
President, General
Counsel and
Secretary

--------------------------

(1) Ms. Maher elected to receive a portion of her 2000 incentive award in
deferred stock units under our incentive program. As a result of this
election, she was credited with a restricted stock unit award in 2001. These
units are subject to forfeiture if withdrawn prior to January 1, 2006.

(2) For Mr. Goodwin, amount includes $23,000 in 2000 for financial advisory
services.

(3) The number and value of restricted stock holdings at December 31, 2000 is:
Mr. Goodwin, 40,000 units, $1,557,600; each of Messrs. Dutta, Hacker and
Studdert, 25,000 shares, $973,500. Mr. Goodwin's grant vests in five equal
annual installments, the first of which began July 13, 2000; the others vest
100% five years from the date of grant. Dividends are paid on these
restricted shares to the extent paid on our common stock.

(4) Amounts include value of shares of ESOP preferred stock allocated to the
officer's account for 2000, 1999 and 1998 (as applicable) as follows, based
upon the applicable year-end closing price of common stock multiplied by the
number of shares of common stock issuable upon conversion of ESOP preferred
stock: Mr. Goodwin, $46,650, $138,527, $66,253; Mr. Dutta, $24,922, $86,948;
Mr. Hacker, $22,313, $94,549, $71,625; Mr. Studdert, $18,730, $75,468,
$52,764; and Ms. Maher, $14,057, $63,213. Balance represents compensation
for split dollar insurance program premiums.

OPTION GRANTS IN 2000

This table gives information about stock options we granted during 2000 to
the officers named in the Summary Compensation Table. The hypothetical present
values of stock options granted in 2000 are calculated under a modified
Black-Scholes model, a mathematical formula used to value options. The actual
amount realized upon exercise of stock options will depend upon the amount by
which the market price of common stock on the date of exercise is greater than
the exercise price. The officers will not be able to realize a gain from the
stock options granted unless, during the exercise period, the market price of
common stock is above the exercise price of the options.

NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE HYPOTHETICAL
UNDERLYING GRANTED TO OR BASE PRESENT VALUE AT
OPTIONS EMPLOYEES IN PRICE EXPIRATION DATE OF GRANT
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE $(2)
---- ------------- ------------ -------- ---------- ----------------

James E. Goodwin 180,000 12.4 53.25 2/22/10 3,204,000

Rono J. Dutta 78,000 5.4 53.25 2/22/10 1,388,400

Douglas A. Hacker 65,000 4.5 53.25 2/22/10 1,157,000

Andrew P. Studdert 65,000 4.5 53.25 2/22/10 1,157,000

Francesca M. Maher 26,000 1.8 53.25 2/22/10 462,800

------------------------

(1) All options become exercisable in four equal annual installments commencing
February 23, 2001, one year from the date of grant. The options are
transferable, at the officer's election, to certain family members.

(2) To realize hypothetical present values upon the exercise of the options, the
market price would have increased to $71.05 for the February 23, 2000
grants. The modified Black-Scholes model used to calculate the hypothetical
values at date of grant considers a number of factors to estimate the
option's present value, including the stock's historic volatility calculated
using the monthly closing price of common stock over a 67 month period
ending February 2000, the estimated average holding period of the option,
interest rates and the stock's expected dividend yield. The assumptions used
in the valuation of the options were: stock price volatility -- .35, holding
period -- 4 years, interest rate -- 6.4%, and dividend yield -- 2.4%.

THERE IS NO ASSURANCE THAT THE HYPOTHETICAL PRESENT VALUES OF STOCK OPTIONS
PRESENTED IN THE TABLE ABOVE REPRESENT THE ACTUAL VALUES OF THE OPTIONS, AND THE
HYPOTHETICAL VALUES SHOWN SHOULD NOT BE VIEWED AS OUR PREDICTIONS OF THE FUTURE
VALUE OF COMMON STOCK.

AGGREGATED OPTION EXERCISES IN 2000
AND FY-END OPTION VALUES*

SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
EXERCISE REALIZED OPTIONS AT FY-END (#) AT FY-END ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- --------- ------------------------- -------------------------

James E. Goodwin 7,600 963,000 214,112/397,338 1,304,125/0

Rono Dutta 29,000 1,110,155 94,586/146,864 77,948/0

Douglas A. Hacker N/A N/A 199,636/133,864 1,862,431/0

Andrew P. Studdert N/A N/A 76,736/116,164 255,000/0

Francesca M. Maher N/A N/A 63,150/ 75,250 246,150/0

------------------------

* Options granted prior to July 12, 1994 are exercisable for two shares of
common stock and $84.81 (after adjustment for the 1996 four-for-one stock
split). The value of those options includes the cash amount delivered when
exercised.

PENSION PLAN TABLE

YEARS OF PARTICIPATION
FINAL --------------------------------------------------------------
AVERAGE PAY 15 20 25 30 35 40
----------- -------- -------- -------- -------- ---------- ----------

$200,000 $ 48,000 $ 64,000 $ 80,000 $ 96,000 $ 112,000 $ 128,000
400,000 96,000 128,000 160,000 192,000 224,000 256,000
600,000 144,000 192,000 240,000 288,000 336,000 384,000
800,000 192,000 256,000 320,000 384,000 448,000 512,000
1,000,000 240,000 320,000 400,000 480,000 560,000 640,000
1,200,000 288,000 384,000 480,000 576,000 672,000 768,000
1,400,000 336,000 448,000 560,000 672,000 784,000 896,000
1,600,000 384,000 512,000 640,000 768,000 896,000 1,024,000
1,800,000 432,000 576,000 720,000 864,000 1,008,000 1,152,000
2,000,000 480,000 640,000 800,000 960,000 1,120,000 1,280,000

This table is based on retirement at age 65 and selection of a straight life
annuity (other annuity options are available, which would reduce the amounts
shown). The amount of the normal retirement benefit under the plan is the
product of 1.6% times years of credited participation in the plan times final
average pay (highest five of last 10 years of covered compensation). The
retirement benefit amount is not offset by the participant's social security
benefit. Compensation used in calculating benefits under the plan includes base
salary and amounts shown as bonus in the Summary Compensation Table. Under the
qualified plan, years of participation for persons named in the compensation
table are as follows: Mr. Goodwin -- 33 years; Mr. Dutta -- 15 years;
Mr. Hacker -- 7 years; Mr. Studdert -- 5 years; and Ms. Maher -- 7 years. The
amounts shown do not reflect limitations imposed by the Internal Revenue Code on
retirement benefits that may be paid under plans qualified under the code.
United has agreed to provide under non-qualified

plans the portion of the retirement benefits earned under the pension plan that
would otherwise be subject to code limitations.

We agreed to supplement Mr. Hacker's benefit by granting him credit for one
additional year of service.

EMPLOYMENT CONTRACTS AND ARRANGEMENTS

We entered into a five-year employment agreement with Mr. Goodwin effective
July 13, 1999. This agreement provides for an annual base salary of $725,000
subject to increases as part of the normal salary program for our senior
executives. Under his employment agreement, Mr. Goodwin is eligible to receive
an annual bonus under the company's annual incentive plan. Mr. Goodwin's target
percentage can be no less than the maximum percentage permitted under the
incentive plan (called the target bonus). He is entitled to an additional 20%
over this target bonus amount under the plan for superior performance -- this
extraordinary bonus may be paid outside the plan.

Under the employment agreement, if the incentive plan is amended or replaced
with a new plan, Mr. Goodwin's incentive award will be determined under the
terms of the new plan; provided that his target percentage and maximum
percentage will be no less than 100% of his base salary.

If Mr. Goodwin's employment is terminated by us without "cause," or by him
for "good reason," we will pay him his base salary, any annual bonus and any
earned and vested benefits he may be due through the termination date. We will
also pay Mr. Goodwin a lump sum payment equal to his base salary and target
bonus multiplied by the greater of (1) the remaining term of his agreement or
(2) three years. Mr. Goodwin's participation in United's benefit plans will also
continue for this period. All long-term incentive awards will immediately vest
on the termination date and any unvested stock options will continue to vest in
accordance with their terms. With respect to the retirement plan, he will be
credited with additional years of participation, if necessary, so that his years
of participation equal 40 and any benefit payments will not be subject to any
actuarial reduction for early payment.

PROPOSAL NO. 2

APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

Our Board, at the recommendation of the Audit Committee, has appointed,
subject to your approval, the firm of Arthur Andersen LLP as independent public
accountants, to examine our financial statements for 2001. It is anticipated
that a representative of Arthur Andersen LLP will be present at the meeting and
will have the opportunity to make a statement, if he or she desires to do so,
and will be available to respond to appropriate questions at that time. If you
do not approve the appointment of Arthur Andersen LLP, our Board will reconsider
the selection of independent public accountants.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS OUR INDEPENDENT PUBLIC ACCOUNTANTS FOR 2001.

INDEPENDENT ACCOUNTANT FEES

The aggregate fees billed for professional services (including out-of-pocket
expenses) rendered by Arthur Andersen in 2000 are as follows:

SERVICE FEE
------- ---------

Audit Fees...................................................................... $ 715,000
Financial Information Systems Design and Implementation Fees.................... $ 219,053
All Other Fees.................................................................. $2,259,119

Our Audit Committee has considered whether the 2000 non-audit services
provided by Arthur Andersen are compatible with maintaining auditor
independence.

PROPOSALS 3 AND 4

STOCKHOLDER PROPOSALS

PROPOSAL NO. 3 CONCERNING COMPENSATION OF DIRECTORS

Mr. William S. Patterson, P. O. Box 15021, Wilmington, North Carolina,
28408-5021, a United Airlines pilot and owner of 3,948 common shares, has given
notice that he will introduce the following resolution at the annual meeting:

"PROPOSAL: BOARD OF DIRECTORS' COMPENSATION

We all place the oversight and leadership of our corporation in the hands of
the Board of Directors.

Resolved: It is recommended that the Board of Directors be compensated well
and only with common corporate stock of this corporation and with an incentive
award tied to the stock value and successful growth of our company."

THE BOARD OF DIRECTORS OPPOSES THE ABOVE PROPOSAL.

The Board of Directors opposes this proposal and does not believe it is in
the best interests of the stockholders. UAL's existing compensation package is
designed to be competitive in order to attract and retain directors with the
expertise needed by UAL. As UAL continues its quest to become the worldwide
airline of choice, it is essential that it provide appropriate compensation
packages to attract and retain talented people at every level -- including
service at the board level.

Members of the Board of Directors are compensated by a combination of cash
and deferred compensation in the form of shares of common stock. At current
market value, approximately 40% of compensation to directors is in the form of
shares of common stock. In fact, our non-management directors' interests are
aligned with those of the company in that each owns, on average, 9,000 shares of
common stock. Furthermore, this proposal runs counter to our corporate
governance, which contemplates a diverse candidate group for board selection, by
limiting the pool of those individuals willing to serve on the board.

In addition, directors may elect, and some have elected, to forego current
cash compensation in favor of deferred equity compensation. Your board of
directors, however, believes that this election should be voluntary and not
imposed on all directors.

THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THIS
PROPOSAL.

PROPOSAL NO. 4 CONCERNING CERTAIN BUSINESS COMBINATIONS

Mr. Bob Hrabe, P. O. Box 359, San Miguel, California, 93451, a United
Airlines pilot and owner of 2,986 common shares, has given notice that he will
introduce the following resolution at the annual meeting:

"PROPOSAL: Submit a request to the UAL Board of Directors to take the steps
necessary to amend the UAL Restated Certificate of Incorporation to provide that
airline acquisitions, which have been approved by a Board of Directors vote,
also be approved by a stockholder vote. It is noted that if this amendment is
implemented, it would not affect the current USAirways acquisition proposal,
which was approved by the Board of Directors in May, 2000. This amendment would
only affect future airline acquisition proposals. It is requested that the UAL
Board of Directors consider approving the amendment in accordance with the most
expedient method available.

SUPPORTING STATEMENT: Presently, the UAL Restated Certificate of
Incorporation provides for either a Board of Directors vote or a stockholder
vote to approve airline acquisitions. In concurrence, while the Delaware
Corporation Laws (Delaware is the state where UAL is incorporated) generally
provide for a stockholder vote on acquisitions and mergers, a stockholder vote
is not necessary for transactions which meet certain requirements, like an all
cash buyout where no shares are issued as a result of the transaction. Last
year, the UAL annual stockholder meeting convened on May 18, 2000. The USAirways
acquisition proposal was not on the agenda because the secret negotiations were
at a standstill. After the stockholder meeting concluded, the negotiations
resumed and a purchase price for the all cash buyout of USAirways was agreed
upon. On May 23, 2000, the acquisition proposal was submitted to the UAL Board
of Directors and approved. This

acquisition proposal has not been put forth for a UAL stockholder vote since the
requirement to do so is not specifically required by either the UAL Restated
Certificate of Incorporation or the Delaware corporate laws."

THE BOARD OF DIRECTORS OPPOSES THE ABOVE PROPOSAL.

The Board of Directors is opposed to this proposal because it is contrary to
the best interests of UAL and its stockholders, and, in particular, because it
would limit UAL's ability to pursue strategic objectives in important respects
when UAL's competitors are not so limited.

The airline industry has been in great flux over the last decade and in
particular over the last year. It is very important that UAL have the same
flexibility as its competitors in pursuing its business objectives, particularly
in these turbulent times. The laws of Delaware (where UAL is incorporated) and
other states are very explicit about when acquisitions and mergers do and do not
require stockholder approval. Most acquisitions for cash, whether by UAL or any
of our competitors, do not require stockholder approval. Changing this state of
affairs for UAL but not for anyone else would limit UAL's flexibility to deal
with fast changing industry conditions and would put UAL in a competitively
disadvantageous position. The proposal should be rejected because it is contrary
to the best interests of our company and its stockholders.

THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THIS
PROPOSAL.

SUBMISSION OF STOCKHOLDER PROPOSALS

If a stockholder of record wishes to submit a proposal for inclusion in next
year's proxy statement and proxy card for our 2002 annual meeting, the proposal
must be submitted no later than November 22, 2001 and comply with SEC rules.
Failure to comply with SEC rules will cause your proposal to be excluded from
the proxy materials. All notices must be submitted to Francesca M. Maher,
Secretary, UAL Corporation, P.O. Box 66919, Chicago, Illinois 60666.

To propose business or nominate a Public Director at the 2002 annual
meeting, proper notice must be submitted by a stockholder of record no later
than January 18, 2002 in accordance with our by-laws. The notice must contain
the information required by the by-laws. No business proposed by a stockholder
can be transacted at the annual meeting, and no nomination by a stockholder will
be considered, unless the notice satisfies the requirements of the by-laws. If
we do not receive notice of any other matter that you wish to raise at the
annual meeting in 2002 on or before January 18, 2002, our by-laws provide that
the matter shall not be transacted and the nomination shall not be considered.

The Outside Public Director Nomination committee considers Public Director
nominees you recommend if submitted in writing to the Committee Chairman at UAL
Corporation, P.O. Box 66919, Chicago, IL 60666. Qualification requirements are
specified in our charter.

ANNUAL REPORT

A copy of our summary Annual Report for the year ended December 31, 2000,
has been mailed to you on or about March 22, 2001 with this proxy statement. Our
audited financial statements, along with other financial information, are
included in the Appendix B to this proxy statement.

Additional copies of the summary Annual Report and this notice of annual
meeting and proxy statement, including the appendix, and accompanying proxy may
be obtained from Georgeson Shareholder Communications Inc., 17 State Street, New
York, New York 10004 or from our Secretary.

A COPY OF OUR FORM 10-K TO THE SEC MAY BE OBTAINED WITHOUT CHARGE BY WRITING
TO FRANCESCA M. MAHER, SECRETARY, UAL CORPORATION, P.O. BOX 66919, CHICAGO,
ILLINOIS 60666. YOU CAN ALSO OBTAIN A COPY OF OUR FORM 10-K AND OTHER PERIODIC
FILINGS FROM THE SEC'S EDGAR DATABASE AT WWW.SEC.GOV.

APPENDIX A
AUDIT COMMITTEE CHARTER
UAL CORPORATION
RESOLUTIONS OF THE BOARD OF DIRECTORS
ADOPTED FEBRUARY 22, 2001

Audit Committee Charter
-----------------------

RESOLVED, that the following resolutions shall constitute the Audit
Committee Charter.

Organization
------------

FURTHER RESOLVED, that the Audit Committee of this Board of Directors
shall be comprised solely of Directors independent of the management of
the Corporation and free from any relationship that, in the opinion of
this Board of Directors, would interfere with their exercise of
independent judgment as a member of the Audit Committee. Directors who
are affiliates of the Corporation or officers or employees of the
Corporation or any of its subsidiaries shall not qualify for membership
on the Audit Committee.

FURTHER RESOLVED, that the composition of the Audit Committee is set
forth in the Corporation's Restated Certificate of Incorporation or the
By-laws. Members of the Audit Committee shall be appointed by this Board
of Directors annually at the organization meeting of this Board or until
their successors are duly appointed and qualified. The Audit Committee
has the power to appoint one of its members to act as chairman of the
committee by the affirmative vote of a majority of the votes entitled to
be cast by all of the members of the committee.

FURTHER RESOLVED, that the Audit Committee shall provide an open avenue
of communication between the independent auditors, management, internal
auditors and this Board of Directors.

Role of Independent Auditors
----------------------------

FURTHER RESOLVED, that the independent auditors are ultimately
accountable to this Board of Directors and the Audit Committee, as
representatives of the stockholders of the Corporation.

FURTHER RESOLVED, that the Audit Committee and this Board of Directors
have the ultimate authority and responsibility to select, evaluate and
where appropriate, replace the independent auditors.

Purpose and Responsibilities
----------------------------

FURTHER RESOLVED, that the purpose and responsibilities of the Audit
Committee of this Board of Directors shall be:

FINANCIAL REPORTING PROCESSES

1. To review and discuss, with management and the independent auditors,
the Corporation's annual financial statements, financial reporting
practices and the results of the annual external audit, and to
review and resolve disputes

A-1

between such independent auditors and management relating to the
preparation of the annual financial statements.

2. To review with the independent auditors the draft of the annual
report to stockholders and the proxy statement (prior to such
statements being sent to stockholders) and the auditor's report and
to make appropriate recommendations to this Board of Directors, and
to review all filings with the Securities and Exchange Commission
(after they are filed therewith, except as otherwise contemplated
by paragraph 9 hereof) that management deems significant and report
to this Board that such review has been made.

3. To inquire into the effectiveness of the financial and accounting
functions, organizations, operations and management of the
Corporation and its subsidiaries, and the adequacy of the internal
accounting controls through discussions and meetings held not less
than annually with the independent auditors, internal auditors and
appropriate officers of the Corporation and its subsidiaries.

4. To review the major accounting policies and significant judgments
affecting the financial statements of the Corporation and its
subsidiaries with management and the independent auditors including
the review of alternatives and recommendations by independent
auditors, and to discuss any other matters required to be discussed
by Statement of Auditing Standards No. 61.

INDEPENDENT AUDITORS

5. To review the professional services of the independent auditors and
to assure itself that the work of the independent auditors is
satisfactory.

6. To review the scope of the annual external audit as recommended by
the independent auditors and ensure the scope of the annual
external audit is sufficiently comprehensive.

7. To determine through discussions with the independent auditors, the
cooperation extended by management of the Corporation and its
subsidiaries, and whether any restrictions were placed on the scope
of the examination or on its implementation.

8. To obtain from the independent auditors at least annually a written
statement delineating all relationships between the auditor and the
Corporation, and to discuss with the independent auditors the
disclosed relationships or services that may impact the objectivity
and independence of the independent auditors and to recommend that
this Board of Directors take appropriate action in response to the
auditors' report to satisfy itself as to the auditors'
independence.

9. To recommend to the Board of Directors, based on the reviews and
discussions with management and the independent auditors as
required under this charter, that the audited financial statements
be included in the Corporation's annual report on Form 10-K.

10. To recommend each year to this Board of Directors, subject to
stockholder approval at the Annual Stockholders Meeting, the
appointment of independent auditors for the ensuing year.

A-2

OTHER PROCESSES AND RESPONSIBILITIES

11. To review with management and the internal auditors the annual
internal audit plan, significant findings during the year and
management's responses thereto, and the internal auditing
department budget and staffing.

12. To inquire into the effectiveness of the internal auditing methods
and procedures of the Corporation and its subsidiaries including
implementation of recommendations by independent auditors.

13. To review annually the adequacy of corporate insurance coverages for
the Corporation and its subsidiaries.

14. To review at least annually the status of significant tax matters
affecting the Corporation and its subsidiaries.

15. To review at least annually the status of significant litigation
affecting the Corporation and its subsidiaries.

16. To review annually the expense reimbursements of the officers of the
Corporation and designated senior officers of the subsidiaries.

17. To review reports to be made at least annually of authorized
corporate political contributions of the Corporation and its
subsidiaries.

18. To review at least annually compliance with accounting provisions of
the Foreign Corrupt Practices Act.

19. To satisfy itself that all perquisites extended to all officers of
the Corporation and its subsidiaries have been authorized
consistent with policies approved by this Board of Directors and to
assure itself that a procedure has been established to monitor
compliance with such policy.

20. To review periodically the Corporation's risk management, cash
management, foreign exchange management and investment management
policies.

21. To review and reassess the adequacy of this charter on an annual
basis.

22. To meet at least three times per year or more frequently as
circumstances require, and have the Chairman of the Audit Committee
hold quarterly discussions, as necessary, with management and the
independent auditors to review the quarterly earnings release and
discuss any matters required to be discussed under Generally
Accepted Auditing Standards.

23. To provide an audit committee report for inclusion in the
Corporation's proxy statement, when and as required by rules of the
Securities and Exchange Commission.

ETHICAL AND LEGAL COMPLIANCE

24. To establish and periodically review the adequacy of the Code of
Business Conduct and corporate compliance programs for the
Corporation and its subsidiaries, to ensure that management has
established a system to enforce the Code and compliance programs,
and to review management's monitoring of the Corporation's
compliance with the Code and corporate compliance programs.

A-3

FURTHER RESOLVED, that for purposes of the preceding resolutions, the
designated senior officers of subsidiaries of this Corporation shall be
any officer of United Air Lines, Inc. who is an "officer" of the
Corporation as such term is defined in Rule 16a-1(f) under the Securities
Exchange Act of 1934, as amended.

FURTHER RESOLVED, that any actions previously taken by the Audit
Committee in respect of matters authorized by the aforesaid resolutions
are hereby approved and ratified in all respects.

FURTHER RESOLVED, that the resolutions of this Board of Directors dated
February 24, 2000, are hereby rescinded insofar as they prescribe the
responsibilities of the Audit Committee.

A-4

APPENDIX B
UAL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED FINANCIAL INFORMATION
INDEX

PAGE
--------

Selected Financial Data and Operating Statistics............ B-2
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. B-3
Quantitative and Qualitative Disclosures About Market
Risk...................................................... B-14
Report of Independent Public Accountants.................... B-16
Statements of Consolidated Operations....................... B-17
Statements of Consolidated Financial Position............... B-18
Statements of Consolidated Cash Flows....................... B-20
Statements of Consolidated Stockholders' Equity............. B-21
Notes to Consolidated Financial Statements.................. B-22

B-1

SELECTED FINANCIAL DATA AND OPERATING STATISTICS

YEAR ENDED DECEMBER 31
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AND RATES)

INCOME STATEMENT DATA:
Operating revenues............... $ 19,352 $ 18,027 $ 17,561 $ 17,378 $ 16,362
Earnings before extraordinary
item and cumulative effect..... 265 1,238 821 958 600
Net earnings..................... 50 1,235 821 949 533
Per share amounts, diluted:
Earnings before extraordinary
item and cumulative effect... 1.89 9.97 6.83 9.04 5.85
Net earnings................... 0.04 9.94 6.83 8.95 5.06
Cash dividends declared per
common share................... 1.25 -- -- -- --

PRO FORMA INCOME STATEMENT
DATA(1):
Earnings before extraordinary
item........................... na $ 1,209 $ 774 $ 931 $ 553
Net earnings..................... na 1,206 774 922 486
Per share amounts, diluted:
Earnings before extraordinary
item......................... na 9.71 6.38 8.76 5.29
Net earnings................... na 9.68 6.38 8.67 4.50

OTHER INFORMATION:
Total assets at year-end......... $ 24,355 $ 20,963 $ 18,559 $ 15,464 $ 12,677
Long-term debt and capital lease
obligations, including current
portion, and redeemable
preferred stock................ 7,487 5,369 5,345 4,278 3,385

Revenue passengers............... 85 87 87 84 82
Revenue passenger miles.......... 126,933 125,465 124,609 121,426 116,697
Available seat miles............. 175,485 176,686 174,008 169,110 162,843
Passenger load factor............ 72.3% 71.0% 71.6% 71.8% 71.7%
Breakeven passenger load
factor......................... 69.4% 64.9% 64.9% 66.0% 66.0%
Passenger revenue per passenger
mile........................... 13.3 CENTS 12.5 CENTS 12.4 CENTS 12.6 CENTS 12.4 CENTS
Operating revenue per available
seat mile...................... 11.0 CENTS 10.2 CENTS 10.1 CENTS 10.3 CENTS 10.0 CENTS
Operating expense per available
seat mile...................... 10.6 CENTS 9.4 CENTS 9.2 CENTS 9.5 CENTS 9.3 CENTS
Fuel gallons consumed............ 3,101 3,065 3,029 2,964 2,883
Average price per gallon of jet
fuel........................... 81.0 CENTS 57.9 CENTS 59.0 CENTS 69.5 CENTS 72.2 CENTS

------------------------

(1) The pro forma income statement amounts reflect adjustments to the
historical income statement data assuming the Company had adopted the
provisions of Staff Accounting Bulletin 101 ("SAB 101") in prior periods.
(See Note 1i "Summary of Significant Accounting Policies -- Mileage Plus
Awards" in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)

B-2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

THIS SECTION CONTAINS VARIOUS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE IDENTIFIED WITH AN
ASTERISK (*). FORWARD-LOOKING STATEMENTS REPRESENT THE COMPANY'S EXPECTATIONS
AND BELIEFS CONCERNING FUTURE EVENTS, BASED ON INFORMATION AVAILABLE TO THE
COMPANY ON THE DATE OF THE FILING OF THIS FORM 10K. THE COMPANY UNDERTAKES NO
OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER
AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. FACTORS THAT COULD
SIGNIFICANTLY IMPACT THE EXPECTED RESULTS REFERENCED IN THE FORWARD-LOOKING
STATEMENTS ARE LISTED IN THE LAST PARAGRAPH OF THE SECTION, "OUTLOOK FOR 2001."
--------------------------------------------------------------------------------

US AIRWAYS ACQUISITION

On May 24, 2000, UAL announced that it had entered into a definitive merger
agreement with US Airways Group, Inc. ("US Airways") pursuant to which US
Airways will be acquired by the Company in an all-cash transaction for
$4.3 billion. Additionally, UAL will assume approximately $1.7 billion in US
Airways net debt and $6.3 billion in operating leases. On October 12, 2000, the
stockholders of US Airways approved the merger. The transaction, which the
Company anticipates closing in the second quarter of 2001, is still subject to
regulatory clearance and other customary closing conditions. Definitive
financing arrangements have not yet been determined although UAL expects to
incur approximately $4.5 billion in additional indebtedness, through a
combination of bank and public financing, to cover the cost of the acquisition
as well as additional costs related to the integration of the airlines.

Subject to regulatory approval of the transaction and the successful outcome
of negotiations with local authorities, the Company announced its intentions to
expand US Airways' maintenance facility in Pittsburgh at a total projected cost
of $160 million. Additionally, the Company recognizes that it will incur
significant costs associated with the integration of US Airways in order to
achieve the anticipated benefits to both the Company and the millions of
passengers and hundreds of communities served by United throughout the United
States. The Company expects that the new network will make traveling more
convenient for passengers, connecting US Airways' eastern U.S. markets with
United's east-west and international markets, thereby creating the nation's most
comprehensive airline network. However, the Company recognizes that it may
encounter difficulties in achieving these significant benefits. As part of the
agreement with US Airways, UAL generally has agreed to pay US Airways a
$50 million termination fee in the event the merger does not take place.

In addition, UAL and US Airways entered into a binding memorandum of
understanding with Robert Johnson, a member of the US Airways Group Board of
Directors, under which Mr. Johnson would buy certain of US Airways' assets and
create a new airline, to be called DC Air, which would compete on numerous
routes currently served by US Airways in the Washington D.C. area.

In a transaction designed to enhance the competitive benefits of the
proposed merger with US Airways and address regulatory concerns, UAL and AMR
Corporation ("AMR") on

B-3

January 9, 2001 announced the approval of a binding memorandum of understanding,
under which AMR's American Airlines subsidiary ("American") will provide
competitive service on key hub-to-hub routes where United and US Airways
currently are the only competitors with non-stop flights. As part of the
agreement, American will also enter into a 20-year joint venture with United to
jointly provide service on routes currently served by the US Airways Shuttle
between New York's LaGuardia Airport, Washington, D.C.'s Reagan National Airport
and Boston's Logan Airport. In addition, United will transfer a number of gates,
slots and up to 86 aircraft acquired in its merger with US Airways to American
deemed to be surplus to the combined United and US Airways entity.

AMR will pay UAL approximately $1.2 billion in cash for this transaction. In
addition, American will assume certain lease obligations and buy certain spare
engines and other parts associated with the aircraft being transferred. The
transaction will provide financial benefits to UAL by reducing the debt
requirements related to the acquisition of US Airways.

On March 2, 2001, UAL announced that it had reached agreement with Atlantic
Coast Airlines Holdings, Inc. ("ACAI"), for US Airways to sell its three wholly
owned regional airlines to ACAI for an initial purchase price of $200 million.
UAL and ACAI will seek to agree upon the ultimate purchase price over an
18-month period. If an ultimate purchase price is not agreed as to a carrier,
then the transaction as to that carrier is subject to being unwound. If ACAI is
not the ultimate purchaser of at least one of the carriers, they will receive a
fee of up to $10 million. The transaction, which is contingent upon and will
occur at the same time as closing of the proposed acquisition of US Airways, is
subject to regulatory approvals and to certain termination rights by UAL. In
addition, at closing, the three carriers (Allegheny Airlines, Piedmont Airlines
and PSA Airlines) are expected to execute agreements to provide feeder service
to the combined United and US Airways network.

RESULTS OF OPERATIONS

During 2000, the Company experienced significant operational disruptions, as
a result of labor-related delays and cancellations, as well as weather and air
traffic control limitations, which adversely affected both revenue and expense
performance. The Company attempted to mitigate the impact of these operational
difficulties by reducing capacity, particularly in the domestic markets, where
most of the problems were concentrated. The Company estimates the revenue
shortfall arising from these disruptions and associated schedule reductions and
cancellations to be somewhere between $700 and $750 million for the year.

SUMMARY OF RESULTS --

UAL's earnings from operations were $654 million in 2000, compared to
operating earnings of $1.4 billion in 1999. UAL's net earnings in 2000 were
$50 million ($0.04 per share, diluted), compared to net earnings of
$1.2 billion in 1999 ($9.94 per share, diluted).

The 2000 earnings include an extraordinary loss of $6 million, after tax, on
early extinguishment of debt and the cumulative effect of a change in accounting
principle of $209 million, net of tax. The 2000 earnings also include an
impairment loss of $38 million, net of tax, ($0.33 per share, diluted) related
to the Company's equity investment in Priceline.com, as well as a gain of
$69 million, net of tax, ($0.60 per share, diluted) on the

B-4

sale of its investment in GetThere.com (see Note 6 "Investments" in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS).

The 1999 earnings include an extraordinary loss of $3 million, after tax, on
early extinguishment of debt and an after-tax gain of $468 million ($4.19 per
share, diluted), on the sale of certain of the Company's investments, as further
described in Note 6 "Investments" in the NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.

2000 COMPARED WITH 1999 --

OPERATING REVENUES. Operating revenues increased $1.3 billion (7%) and
United's revenue per available seat mile (unit revenue) increased 8% to 11.02
cents. Passenger revenues increased $1.1 billion (7%) primarily due to a 6%
increase in yield to 13.25 cents. United's revenue passenger miles increased 1%,
while available seat miles decreased 1%, resulting in a passenger load factor
increase of 1.3 points to 72.3%. The decrease in available seat miles reflects
the Company's response to the operational difficulties as well as the impact of
Economy Plus. The following analysis by market is based on information reported
to the DOT:

INCREASE (DECREASE)
-------------------------------------------------------------------
AVAILABLE SEAT REVENUE PASSENGER MILES REVENUE PER REVENUE
MILES (CAPACITY) (TRAFFIC) PASSENGER MILE (YIELD)
---------------- ----------------------- ----------------------

North America........... (4%) (3%) 7%
Pacific................. 10% 11% 7%
Atlantic................ 6% 6% 8%
Latin America........... (10%) (1%) 4%
System................ (1%) 1% 6%

Cargo revenues increased $25 million (3%) on increased freight ton miles of
3%, as freight yields remained constant and mail yields increased 1%. Other
operating revenues increased $152 million (19%) primarily due to increased fuel
sales to third parties and additional revenues from operating agreements with
Galileo International, Inc. ("Galileo"), offset by the decrease in other
revenues related to the change in accounting for Mileage Plus sale of miles to
third parties (see Note 1i "Summary of Significant Accounting
Policies -- Mileage Plus Awards" in the NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS).

OPERATING EXPENSES. Operating expenses increased $2.1 billion (12%) and
United's cost per available seat mile increased 13% from 9.41 to 10.63 cents.
Salaries and related costs increased $1.1 billion (19%) due to a new salary
program implemented for non-contract employees, the impact of the new ALPA
contract, and the estimated costs of IAM contracts which became amendable in
July 2000 and are currently under negotiation. ESOP compensation expense
decreased $609 million (81%) as the Company discontinued recording ESOP
compensation expense once the final ESOP shares were committed to be released in
April 2000. Aircraft fuel increased $735 million (41%) due to a 40% increase in
the cost of fuel to 81.0 cents per gallon. Commissions decreased $114 million
(10%) due to a change in the commission structure implemented in the fourth
quarter of 1999. Purchased services increased $136 million (9%) due to increases
in computer reservations fees and credit card discount fees. Depreciation and
amortization increased $138 million (16%) due to an increase in the number of
owned aircraft and losses on disposition of aircraft and other

B-5

equipment. Cost of sales increased $436 million (72%) primarily due to costs
associated with fuel sales to third parties.

OTHER INCOME AND EXPENSE. Other income (expense) amounted to $223 million
in expense in 2000 compared to $551 million in income in 1999. Interest expense
increased $40 million (11%) due to increased debt issuances in 2000. Interest
income increased $33 million (49%) due to higher investment balances. In
addition, 2000 included a $109 million gain on the sale of GetThere.com stock
and a $61 million investment impairment related to warrants held in
Priceline.com, while 1999 included a $669 million gain on the sale of Galileo
stock and a $62 million gain on the sale of Equant N.V. ("Equant") stock.

1999 COMPARED WITH 1998 --

OPERATING REVENUES. Operating revenues increased $466 million (3%) and
United's revenue per available seat mile (unit revenue) increased 1% to 10.17
cents. Passenger revenues increased $264 million (2%) due to a 1% increase in
United's revenue passenger miles and a 1% increase in yield to 12.48 cents.
Available seat miles across the system were up 2% year over year; however,
passenger load factor decreased 0.6 points to 71.0% as traffic only increased 1%
system-wide. The following analysis by market is based on information reported
to the DOT:

North America........... 4% 2% 1%
Pacific................. (12%) (11%) 3%
Atlantic................ 14% 14% (7%)
Latin America........... (7%) (3%) (3%)
System................ 2% 1% 1%

Cargo revenues decreased $7 million (1%) despite increased freight ton miles
of 5%, as a 4% decline in freight yield combined with a 3% decline in mail
yield. Other operating revenues increased $209 million (19%) due to increases in
frequent flyer program partner related revenues and fuel sales to third parties.

OPERATING EXPENSES. Operating expenses increased $553 million (3%) and
United's cost per available seat mile increased 2% from 9.24 to 9.41 cents. ESOP
compensation expense decreased $73 million (9%), reflecting the decrease in the
estimated average fair value of ESOP stock committed to be released to employees
as a result of UAL's lower common stock price. Salaries and related costs
increased $329 million (6%) as a result of increased staffing in
customer-contact positions, as well as salary increases for most labor groups
which took effect July 1, 1998. Commissions decreased $186 million (14%) due to
a change in the commission structure implemented in the third quarter 1998 as
well as a slight decrease in commissionable revenues. In addition, in
October 1999, the Company reduced the base commissions for tickets purchased in
the U.S. and Canada to 5%, subject to roundtrip caps of $50 domestic and $100
international. Purchased services increased $70 million (5%) due to increases in
computer reservations fees and year 2000-related expenses. Depreciation and
amortization increased $74 million (9%) due to an increase in the number of
owned aircraft and losses on disposition of aircraft partially offset by changes
in depreciable lives of certain aircraft. In addition, United wrote-down two
non-operating B747-200 aircraft to net

B-6

realizable value. Cost of sales increased $128 million (27%) primarily due to
costs associated with fuel sales to third parties. Aircraft maintenance
increased $65 million (10%) due to an increase in heavy maintenance visits.

OTHER INCOME AND EXPENSE. Other income (expense) amounted to $551 million
in income in 1999 compared to $222 million in expense in 1998. Interest
capitalized, primarily on aircraft advance payments, decreased $30 million
(29%). Interest income increased $9 million (15%) due to higher investment
balances. In addition, 1999 included a $669 million gain on the sale of Galileo
stock and a $62 million gain on the sale of Equant stock.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY --

UAL's total of cash and cash equivalents and short-term investments was
$2.3 billion at December 31, 2000, compared to $689 million at December 31,
1999. Operating activities during the year generated $2.5 billion.

Property additions, including aircraft, aircraft spare parts, facilities and
ground equipment, amounted to $2.5 billion, while property dispositions resulted
in proceeds of $324 million. In 2000, United took delivery of four A319, twelve
A320, one B747, three B767 and eight B777 aircraft. Twenty-six of these aircraft
were purchased and two were acquired under capital leases. Five of the aircraft
purchased during the year were later sold and then leased back under capital
leases. In addition, United retired three DC10-10, four DC10-30F and seven B747
aircraft.

During 2000, the Company made payments of $81 million for the repurchase of
1.3 million shares of common stock. Financing activities included the issuance
of $2.4 billion in equipment trust certificates, as well as principal payments
under debt and capital lease obligations of $441 million and $283 million,
respectively. Included in the debt payments was the retirement of $116 million
of long-term debt prior to maturity. Additionally, UAL issued, and subsequently
retired, $200 million in long-term debt during the period to finance the
acquisition of aircraft. UAL may also from time to time repurchase on the open
market, in privately negotiated purchases or otherwise, its debt and equity
securities.

Included in cash and cash equivalents at December 31, 2000 were $39 million
of securities held by third parties under securities lending agreements, as well
as collateral in the amount of 102% of the value of the securities lent. United
is obligated to reacquire the securities at the end of the contract.

As of December 31, 2000, UAL had a working capital deficit of $2.0 billion
as compared to $2.5 billion at December 31, 1999. Historically, UAL has operated
with a working capital deficit and, as in the past, UAL expects to meet all of
its obligations as they become due.

PRIOR YEARS. Operating activities in 1999 generated cash flows of
$2.4 billion and the Company's sale of part of its investments in Galileo and
Equant provided $828 million in cash. Cash was used primarily to fund net
additions to property and equipment ($2.2 billion) and to repurchase common
stock ($261 million). Financing activities also included principal payments
under debt and capital lease obligations of $513 million and $248 million,
respectively.

B-7

Operating activities in 1998 generated cash flows of $3.2 billion. Cash was
used primarily to fund net additions to property and equipment ($2.4 billion)
and to repurchase common stock ($459 million). Financing activities also
included repayments of long-term debt totaling $271 million and payments under
capital leases of $322 million, as well as aircraft lease deposits of
$154 million. Additionally, the Company issued $928 million in debt and used
part of the proceeds to purchase $693 million in equipment certificates under
Company operating leases.

CAPITAL COMMITMENTS --

At December 31, 2000, commitments for the purchase of property and
equipment, principally aircraft, approximated $4.7 billion, after deducting
advance payments. Of this amount, an estimated $2.5 billion is due to be spent
in 2001. For further details, see Note 18 "Commitments, Contingent Liabilities
and Uncertainties" in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

CAPITAL RESOURCES --

Funds necessary to finance aircraft acquisitions are expected to be obtained
from internally generated funds, external financing arrangements or other
external sources. Additionally, during 2001, UAL anticipates requiring
additional financing for its planned acquisition of US Airways.

At December 31, 2000, UAL and United had an effective shelf registration
statement on file with the Securities and Exchange Commission to offer up to
$2.5 billion of securities, including secured and unsecured debt, equipment
trust and pass through certificates or a combination thereof. United also has
available approximately $1.7 billion in short-term revolving credit facilities,
as well as a separate $227 million short-term borrowing facility, as described
in Note 8 "Short-Term Borrowings" in the NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.

At December 31, 2000, United's senior unsecured debt was rated BB+ by
Standard and Poor's ("S&P") and Baa3 by Moody's Investors Service Inc.
("Moody's"). UAL's Series B preferred stock and redeemable preferred securities
were rated B+ by S&P and Ba3 by Moody's. Immediately following UAL's
announcement of the planned acquisition of US Airways, S&P placed UAL and United
securities on CreditWatch with negative implications.

OTHER INFORMATION

LABOR AGREEMENTS --

On April 12, 2000, the Company's contract with ALPA became amendable and in
October 2000, the parties signed a new contract. The agreement, which will
become amendable September 1, 2004, includes provisions for an immediate
increase in wages of 21.5% to 28.7%, retroactive to April 12, as well as
additional annual increases of 4.5% to 5.6% for the duration of the contract.
Additionally, the contract allows United Express carriers to increase the number
of small jets beyond the current 65-jet limit up to an additional 150
immediately as replacements for existing turboprops, with additional increases
in small jets as United's fleet grows. United may also share in profits and
losses of revenues with foreign carriers with whom United has antitrust
immunity, provided United gets its

B-8

proportionate share of the flying. In addition, the Company has reached
agreement with ALPA to provide United pilots with protections that are
realistically representative of their pre-merger expectations.

On July 12, 2000, the Company's contracts with the IAM became amendable. The
Company has been in negotiations with the IAM since January 2000 for new
contracts. Since September 2000, the negotiations have been conducted with the
assistance of the National Mediation Board. Under the terms of the Railway Labor
Act, United's current agreements with the IAM will remain in effect while
negotiations continue. The Company has agreed that wage increases under the new
IAM contracts will be retroactive to July 12, 2000 and the estimated costs of
those contracts have been included in the Company's results for 2000. The
Company and the IAM had also initialed an agreement on December 12, 2000 that
would have provided for job protection benefits to most mechanics, including
relocation protection in the case of displacement due to the merger transaction.
The IAM has recently notified the Company that they consider that agreement to
be rescinded. Talks are ongoing and United hopes to reach agreement with the IAM
on these issues.

The Company's contract with the AFA, which becomes amendable in 2006,
provides for a mid-term wage conference in the first quarter of 2001. However,
in September 2000, United and the AFA began wage discussions unrelated to the
contract that would have avoided the need for this wage conference. The parties
also began addressing integration issues related to United's acquisition of US
Airways at this time. The Company and the AFA have not reached agreement on
these issues to date and the Company began wage conference negotiations per the
contract in February 2001. The Company is continuing to seek to resolve all
outstanding issues with the AFA, although arbitration may be required per the
collective bargaining agreement, if an agreement cannot be reached on wages. It
is the Company's desire through these discussions to avoid any AFA operational
action that would significantly inconvenience its customers or disrupt
schedules. However, should such action occur, the Company will take appropriate
steps to minimize the impact to the Company and its customers.

E-COMMERCE --

In October 2000, UAL announced the formation of United NewVentures, Inc., a
wholly owned subsidiary which will create businesses to provide innovative
solutions for its customers, strengthen United's airline business and create
incremental value for UAL's stockholders. The subsidiary employs about 100
people, primarily from the Company's former e-commerce organization and consists
of two divisions, United NetWorks and United NetVentures.

United NetWorks focuses on expanding United-branded e-commerce and wireless
activities, including the recently redesigned united.com web site, as well as
assuming responsibility for marketing the sale of Mileage Plus miles to third
parties. Gross air bookings on united.com in 2000 grew more than 101% over last
year. Total passenger revenue from sales over the Internet reached $755 million
for the year compared to $400 million for 1999, an 89% increase.

United NetVentures will manage United's investments in other Internet
ventures, including two new multi-airline travel-oriented web sites, Orbitz and
Hotwire, and identify new business opportunities in e-commerce.

B-9

FOREIGN OPERATIONS --

United generates revenues and incurs expenses in numerous foreign
currencies. These expenses include aircraft leases, commissions, catering,
personnel expense, advertising and distribution costs, customer service expenses
and aircraft maintenance. Changes in foreign currency exchange rates impact
operating income through changes in foreign currency-denominated operating
revenues and expenses. Despite the adverse (favorable) effects a strengthening
(weakening) foreign currency may have on U.S. originating traffic, a
strengthening (weakening) of foreign currencies tends to increase (decrease)
reported revenue and operating income because United's foreign
currency-denominated operating revenue generally exceeds its foreign
currency-denominated operating expense for each currency.

With a worldwide network and significant sales and marketing efforts in the
U.S. as well as every major economic region in the world, United is able to
mitigate its exposure to fluctuations in any single foreign currency. The
Company's biggest net exposures are typically for Japanese yen, Hong Kong
dollars, Australian dollars, British pounds and the euro. During 2000,
yen-denominated operating revenue net of yen-denominated operating expense was
approximately 21 billion yen (approximately $195 million), Hong Kong dollar-
denominated operating revenue net of Hong Kong dollar-denominated operating
expense was approximately 1,397 million Hong Kong dollars (approximately
$179 million), British pound-denominated operating revenue net of British
pound-denominated operating expense was approximately 97 million British pounds
(approximately $142 million), Australian dollar-denominated operating revenue
net of Australian dollar-denominated operating expense was approximately
154 million Australian dollars (approximately $90 million), and euro-denominated
operating revenue net of euro-denominated operating expense was approximately
34 million euro (approximately $33 million).

To reduce the impact of exchange rate fluctuations on United's financial
results, the Company hedged some of the risk of exchange rate volatility on its
anticipated future foreign currency revenues by purchasing put options
(consisting of Japanese yen, euro, Australian dollars and British pounds) and
selling Hong Kong dollar forwards. To reduce hedging costs, the Company sells a
correlation option in the first four currencies referred to above. United also
attempts to reduce its exposure to transaction gains and losses by converting
excess local currencies generated to U.S. dollars on a timely basis and by
entering into currency forward or exchange contracts. The total notional amount
of outstanding currency options and forward exchange contracts, and their
respective fair market values as of December 31, 2000, are summarized in ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

United's foreign operations involve insignificant amounts of physical
assets; however, the Company does have sizable intangible assets related to
acquisitions of Atlantic and Latin America route authorities. Operating
authorities in international markets are governed by bilateral aviation
agreements between the United States and foreign countries. Changes in U.S. or
foreign government aviation policies can lead to the alteration or termination
of existing air service agreements that could adversely impact the value of
United's international route authority. Significant changes in such policies
could also have a material impact on UAL's operating revenues and results of
operations. In addition, the Financial Accounting Standards Board ("FASB") has
issued an Exposure Draft, "Business Combinations and Intangible
Assets -- Accounting for Goodwill," which could impact the

B-10

Company's accounting for these assets. For further details, see "New Accounting
Pronouncements" below.

AIRPORT RENTS AND LANDING FEES --

United is charged facility rental and landing fees at virtually every
airport at which it operates. In recent years, many airports have increased or
sought to increase rates charged to airlines as a means of compensating for
increasing demands upon airport revenues. Airlines have challenged certain of
these increases through litigation and in some cases have not been successful.
The FAA and the DOT have instituted an administrative hearing process to judge
whether rate increases are legal and valid. However, to the extent the
limitations on such charges are relaxed or the ability of airlines to challenge
such charges is restricted, the rates charged by airports may increase
substantially. Management cannot predict either the likelihood or the magnitude
of any such increase.

ENVIRONMENTAL AND LEGAL CONTINGENCIES --

United has been named as a Potentially Responsible Party at certain
Environmental Protection Agency ("EPA") cleanup sites which have been designated
as Superfund Sites. United's alleged proportionate contributions at the sites
are minimal; however, at sites where the EPA has commenced litigation, potential
liability is joint and several. Additionally, United has participated and is
participating in remediation actions at certain other sites, primarily airports.
The estimated cost of these actions is accrued when it is determined that it is
probable that United is liable. Environmental regulations and remediation
processes are subject to future change, and determining the actual cost of
remediation will require further investigation and remediation experience.
Therefore, the ultimate cost cannot be determined at this time. However, while
such cost may vary from United's current estimate, United believes the
difference between its accrued reserve and the ultimate liability will not be
material.*

UAL has certain other contingencies resulting from this and other litigation
and claims incident to the ordinary course of business. Management believes,
after considering a number of factors, including (but not limited to) the views
of legal counsel, the nature of such contingencies and prior experience, that
the ultimate disposition of these contingencies is not likely to materially
affect UAL's financial condition, operating results or liquidity.*

COMMON STOCK DIVIDENDS --

During 2000, UAL instituted an annual dividend of $1.25 per share on UAL
common stock. Accordingly, UAL paid $36 million ($0.3125 per share) in common
dividends in each of the second, third and fourth quarters of 2000. In addition,
on December 14, UAL's Board of Directors declared a dividend of $0.3125 per
share payable on February 1, 2001 to stockholders of record January 16, 2001.

NEW ACCOUNTING PRONOUNCEMENTS --

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"), which establishes accounting and reporting standards requiring that
every derivative instrument be recorded in the balance sheet as either an asset
or liability measured at its fair value. SFAS

B-11

No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting.

The effective date of SFAS No. 133 was delayed one year, to fiscal years
beginning after June 15, 2000. The Company plans to adopt SFAS No. 133, which
was subsequently amended by SFAS No. 138, in the first quarter of 2001. United
has reviewed its various contracts to determine which contracts meet the
requirements of SFAS No. 133, as amended, and need to be reflected as
derivatives under the standard and accounted for at fair value. Accordingly, the
Company will recognize a charge for the cumulative effect of a change in
accounting principle of $8 million, net of tax, in the first quarter 2001. In
addition, the Company believes the adoption of SFAS 133 will increase volatility
in earnings and other comprehensive income.

On February 14, 2001, the FASB issued an Exposure Draft "Business
Combinations and Intangible Assets -- Accounting for Goodwill." The Exposure
Draft requires the use of a non-amortization approach to account for purchased
goodwill and for separately recognized (non-goodwill) intangible assets that
have an indefinite useful economic life. Under this approach, goodwill and
certain intangibles would not be amortized, but would be written down and
expensed against earnings only in periods in which the recorded value is more
than the fair value. The Company has not yet quantified the impacts of adopting
the new Exposure Draft, but it could result in significant changes to the
classification and recording of intangibles and amortization expense currently
on the books, as well as the accounting for the planned acquisition of US
Airways.

OUTLOOK FOR 2001* --

The softening of the U.S. economy has had an industry-wide effect on
business travel; as a result, the Company has experienced a decrease in
high-yield near-term bookings. In addition, passenger revenue performance is
expected to be negatively impacted by the reduced capacity level put in place to
improve operational reliability. Given these weaker-than-anticipated revenues,
combined with higher labor costs and fuel prices, the Company expects
first-quarter results to be substantially below the current First Call consensus
of $2.82 loss per share.

The Company had previously provided full-year guidance, including the
possible effects of its planned acquisition of US Airways, based on business
plans prepared before the onset of the revenue deterioration. With the weakening
of the U.S. economic situation, the Company has taken steps to reduce planned
2001 spending by $200 million. However, based on expectations that revenue
weakness will continue, the Company now expects performance to be below plan
levels for the full year.

The uncertainty surrounding key factors affecting the Company's financial
performance, such as the breadth and length of the U.S. economic slowdown, the
outcome of the planned United and US Airways merger and the outcome of labor
negotiations and the cost of fuel, among other factors, precludes the Company
from providing any specific estimates on results at this time.

B-12

Information included in the above outlook section, as well as certain
statements made throughout the Management's Discussion and Analysis of Financial
Condition and Results of Operations that are identified by an asterisk (*) is
forward-looking and involves risks and uncertainties that could result in actual
results differing materially from expected results. Forward-looking statements
represent the Company's expectations and beliefs concerning future events, based
on information available to the Company as of the date of this filing. Some
factors that could significantly impact revenues, expenses, unit costs, and the
results and benefits of the pending merger between United and US Airways
include, without limitation, the airline pricing environment; industry capacity
decisions; competitors' route decisions; obtaining regulatory approvals for the
United and US Airways merger; successfully integrating the businesses of United
and US Airways; costs related to the United and US Airways merger; achieving
cost-cutting synergies resulting from the United and US Airways merger; labor
integration issues; the success of the Company's cost-control efforts; the cost
of crude oil and jet fuel; the ultimate outcome of existing litigation; the
results of union contract negotiations and their impact on labor costs;
operational disruptions as a result of bad weather, air traffic control-related
difficulties and labor issues; the growth of e-commerce and off-tariff
distribution channels; the effective deployment of customer service tools and
resources; actions of the U.S., foreign and local governments; foreign currency
exchange rate fluctuations; the economic environment of the airline industry and
the economic environment in general.

Investors should not place undue reliance on the forward-looking information
contained herein, which speaks only as of the date of this filing. UAL disclaims
any intent or obligation to update or alter any of the forward-looking
statements whether in response to new information, unforeseen events, changed
circumstances or otherwise.

B-13

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK -- United's exposure to market risk associated with
changes in interest rates relates primarily to its debt obligations and
short-term investments. United does not use derivative financial instruments in
its investments portfolio. United's policy is to manage interest rate risk
through a combination of fixed and floating rate debt and entering into swap
agreements, depending upon market conditions. A portion of the borrowings are
denominated in foreign currencies which exposes the Company to risks associated
with changes in foreign exchange rates. To hedge against some of this risk, the
Company has placed foreign currency deposits (primarily for Japanese yen, French
francs, German marks and euros) to meet foreign currency lease obligations
designated in the respective currencies. Since unrealized mark-to-market gains
or losses on the foreign currency deposits are offset by the losses or gains on
the foreign currency obligations, the Company reduces its overall exposure to
foreign currency exchange rate volatility. The fair value of these deposits is
determined based on the present value of future cash flows using an appropriate
swap rate. The fair value of long-term debt is based on the quoted market prices
for the same or similar issues or the present value of future cash flows using a
U.S. Treasury rate that matches the remaining life of the instrument, adjusted
by a credit spread.

EXPECTED MATURITY DATES 2000 1999
---------------------------------------------------- ------------------- --------
FAIR
(IN MILLIONS) 2001 2002 2003 2004 2005 THEREAFTER TOTAL VALUE TOTAL
------------- -------- -------- -------- -------- -------- ---------- -------- -------- --------

ASSETS
Cash equivalents
Fixed rate................. $1,674 $ -- $ -- $ -- $ -- $ -- $1,674 $1,674 $ 231
Avg. interest rate....... 6.68% -- -- -- -- -- 6.68% 5.27%
Variable rate.............. $ 5 $ -- $ -- $ -- $ -- $ -- $ 5 $ 5 $ 79
Avg. interest rate....... 6.96% -- -- -- -- -- 6.96% 6.23%
Short term investments
Fixed rate................. $ 590 $ -- $ -- $ -- $ -- $ -- $ 590 $ 590 $ 298
Avg. interest rate....... 6.96% -- -- -- -- -- 6.96% 5.96%
Variable rate.............. $ 75 $ -- $ -- $ -- $ -- $ -- $ 75 $ 75 $ 81
Avg. interest rate....... 6.77% -- -- -- -- -- 6.77% 6.42%

Lease deposits
Fixed rate -- yen
deposits................. $ -- $ -- $ -- $ -- $ -- $ 348 $ 348 $ 394 $ 378
Avg. interest rate....... -- -- -- -- -- 3.06% 3.06% 3.07%
Fixed rate -- FF
deposits................. $ -- $ -- $ -- $ -- $ -- $ 10 $ 10 $ 9 $ 10
Avg. interest rate....... -- -- -- -- -- 5.61% 5.61% 5.61%
Fixed rate -- DM
deposits................. $ 2 $ 2 $ 2 $ 2 $ 2 $ 304 $ 314 $ 354 $ 167
Avg. interest rate....... 4.57% 4.53% 4.57% 4.60% 4.63% 6.79% 6.72% 6.49%
Fixed rate -- EUR
deposits................. $ -- $ -- $ -- $ -- $ -- $ 26 $ 26 $ 24 $ 27
Avg. interest rate....... -- -- -- -- -- 4.14% 4.14% 4.14%
Fixed rate -- USD
deposits................. $ -- $ -- $ -- $ -- $ -- $ 12 $ 12 $ 13 $ 11
Avg. interest rate....... -- -- -- -- -- 6.49% 6.49% 6.49%

LONG-TERM DEBT
U. S. Dollar denominated
Fixed rate debt............ $ 87 $ 86 $ 218 $ 333 $ 246 $2,514 $3,484 $3,617 $1,433
Avg. interest rate....... 7.62% 7.63% 8.43% 9.85% 7.73% 7.64% 7.90% 8.26%
Variable rate debt......... $ 83 $ 569 $ 523 $ 17 $ 17 $ 174 $1,383 $1,383 $1,307
Avg. interest rate....... 6.23% 5.91% 6.70% 6.34% 6.34% 6.43% 6.30% 6.26%

1999
--------
FAIR
(IN MILLIONS) VALUE
------------- --------

ASSETS
Cash equivalents
Fixed rate................. $ 231
Avg. interest rate.......
Variable rate.............. $ 79
Avg. interest rate.......
Short term investments
Fixed rate................. $ 298
Avg. interest rate.......
Variable rate.............. $ 81
Avg. interest rate.......
Lease deposits
Fixed rate -- yen
deposits................. $ 423
Avg. interest rate.......
Fixed rate -- FF
deposits................. $ 9
Avg. interest rate.......
Fixed rate -- DM
deposits................. $ 177
Avg. interest rate.......
Fixed rate -- EUR
deposits................. $ 23
Avg. interest rate.......
Fixed rate -- USD
deposits................. $ 10
Avg. interest rate.......
LONG-TERM DEBT
U. S. Dollar denominated
Fixed rate debt............ $1,542
Avg. interest rate.......
Variable rate debt......... $1,307
Avg. interest rate.......

FOREIGN CURRENCY RISK -- United has established a foreign currency hedging
program using currency forwards and options (purchasing put options and selling
correlation options) to hedge exposure to the Japanese yen, Hong Kong dollar,
British pound, Australian dollar and the euro. The goal of the hedging program
is to effectively manage risk associated with fluctuations in the value of the
foreign currency, thereby making financial results more

B-14

stable and predictable. United does not use currency forwards or currency
options for trading purposes.

DECEMBER 31, 2000
-----------------------------------------
NOTIONAL AVERAGE ESTIMATED
(IN MILLIONS, EXCEPT AVERAGE CONTRACT RATES) AMOUNT CONTRACT RATE FAIR VALUE
-------------------------------------------- -------- ------------- --------------
(PAY)/RECEIVE*

Forward exchange contracts
Japanese Yen -- Purchased forwards.......... $141 112.33 $ (3)
-- Sold forwards................ $ 66 114.71 $ --
Hong Kong Dollar -- Sold forwards............. $ 23 7.79 $ --
French Franc -- Purchased forwards............ $ 50 5.05 $ (6)
Euro -- Purchased forwards.................... $140 1.30 $(14)

As of December 31, 1999, United had $144 million of Japanese yen purchased
forwards outstanding with a fair value of $(1) million, $62 million yen sold
forwards with a fair value of $0 and $402 million yen put options with a fair
value of $7 million.

PRICE RISK (AIRCRAFT FUEL) -- When market conditions indicate risk reduction
is achievable, United enters into fuel option contracts to reduce its price risk
exposure to jet fuel. The option contracts are designed to provide protection
against sharp increases in the price of aircraft fuel. Based on current market
conditions, United does not believe risk reduction is achievable and is no
longer entering into new option contracts. As market conditions change, so may
United's hedging program. In addition, to a limited extent, United trades
short-term heating oil futures and option contracts, which are immaterial.

At December 31, 1999, United had $1.1 billion in purchased call option
contracts for crude oil with an estimated fair value of $120 million.

*ESTIMATED FAIR VALUES REPRESENT THE AMOUNT UNITED WOULD PAY/RECEIVE ON
DECEMBER 31, 2000 TO TERMINATE THE CONTRACTS.

B-15

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and
Board of Directors, UAL Corporation:

We have audited the accompanying statements of consolidated financial
position of UAL Corporation (a Delaware corporation) and subsidiary companies as
of December 31, 2000 and 1999, and the related statements of consolidated
operations, consolidated cash flows and consolidated stockholders' equity for
each of the three years in the period ended December 31, 2000. These financial
statements and the schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of UAL
Corporation and subsidiary companies as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.

As explained in Note 1 of the Notes to Consolidated Financial Statements,
effective January 1, 2000, the Company changed certain of its accounting
principles for revenue recognition as a result of the adoption of Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements."

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule referenced in Item 14(a)2
herein is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

ARTHUR ANDERSEN LLP

Chicago, Illinois
February 22, 2001

B-16

UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE)

YEAR ENDED DECEMBER 31
------------------------------
2000 1999 1998
-------- -------- --------

Operating revenues:
Passenger................................................. $16,932 $15,784 $15,520
Cargo..................................................... 931 906 913
Other operating revenues.................................. 1,489 1,337 1,128
------- ------- -------
19,352 18,027 17,561
------- ------- -------
Operating expenses:
Salaries and related costs................................ 6,730 5,670 5,341
ESOP compensation expense................................. 147 756 829
Aircraft fuel............................................. 2,511 1,776 1,788
Commissions............................................... 1,025 1,139 1,325
Purchased services........................................ 1,711 1,575 1,505
Aircraft rent............................................. 919 876 893
Landing fees and other rent............................... 959 949 881
Depreciation and amortization............................. 1,058 867 793
Cost of sales............................................. 1,038 602 474
Aircraft maintenance...................................... 698 689 624
Other operating expenses.................................. 1,902 1,737 1,630
------- ------- -------
18,698 16,636 16,083
------- ------- -------
Earnings from operations.................................... 654 1,391 1,478
------- ------- -------
Other income (expense):
Interest expense.......................................... (402) (362) (355)
Interest capitalized...................................... 77 75 105
Interest income........................................... 101 68 59
Equity in earnings (losses) of affiliates................. (12) 37 72
Gain on sale of investments............................... 109 731 --
Investment impairment..................................... (61) -- --
Miscellaneous, net........................................ (35) 2 (103)
------- ------- -------
(223) 551 (222)
------- ------- -------
Earnings before income taxes, distributions on preferred
securities, extraordinary item and cumulative effect...... 431 1,942 1,256
Provision for income taxes.................................. 160 699 429
------- ------- -------
Earnings before distributions on preferred securities,
extraordinary item and cumulative effect.................. 271 1,243 827
Distributions on preferred securities, net of tax........... (6) (5) (6)
------- ------- -------
Earnings before extraordinary item and cumulative effect.... 265 1,238 821
Extraordinary loss on early extinguishment of debt, net of
tax....................................................... (6) (3) --
Cumulative effect of accounting change, net of tax.......... (209) -- --
------- ------- -------
Net earnings................................................ $ 50 $ 1,235 $ 821
======= ======= =======
Per share, basic:
Earnings before extraordinary item and cumulative
effect.................................................. $ 4.29 $ 21.26 $ 12.71
Extraordinary loss on early extinguishment of debt, net of
tax..................................................... (0.13) (0.06) --
Cumulative effect of accounting change, net of tax........ (4.08) -- --
------- ------- -------
Net earnings.............................................. $ 0.08 $ 21.20 $ 12.71
======= ======= =======
Per share, diluted:
Earnings before extraordinary item and cumulative
effect.................................................. $ 1.89 $ 9.97 $ 6.83
Extraordinary loss on early extinguishment of debt, net of
tax..................................................... (0.06) (0.03) --
Cumulative effect of accounting change, net of tax........ (1.79) -- --
------- ------- -------
Net earnings.............................................. $ 0.04 $ 9.94 $ 6.83
======= ======= =======

See accompanying Notes to Consolidated Financial Statements.

B-17

UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN MILLIONS)

DECEMBER 31
-------------------
ASSETS 2000 1999
------ -------- --------

Current assets:
Cash and cash equivalents................................. $ 1,679 $ 310
Short-term investments.................................... 665 379
Receivables, less allowance for doubtful accounts (2000 --
$14; 1999 -- $13)....................................... 1,216 1,284
Aircraft fuel, spare parts and supplies, less obsolescence
allowance(2000 -- $55; 1999 -- $45)..................... 424 340
Income tax receivables.................................... 110 32
Deferred income taxes..................................... 225 222
Prepaid expenses and other................................ 460 368
------- -------
4,779 2,935
------- -------

Operating property and equipment:
Owned --
Flight equipment........................................ 14,888 13,518
Advances on flight equipment............................ 810 809
Other property and equipment............................ 3,714 3,368
------- -------
19,412 17,695

Less -- Accumulated depreciation and amortization....... 5,583 5,207
------- -------
13,829 12,488
------- -------

Capital leases --
Flight equipment........................................ 3,055 2,929
Other property and equipment............................ 99 93
------- -------
3,154 3,022

Less -- Accumulated amortization........................ 640 645
------- -------
2,514 2,377
------- -------
16,343 14,865
------- -------

Other assets:
Investments............................................... 435 750
Intangibles, less accumulated amortization (2000 -- $306;
1999 -- $279)........................................... 671 568
Aircraft lease deposits................................... 710 594
Prepaid rent.............................................. 567 585
Other..................................................... 850 666
------- -------
3,233 3,163
------- -------
$24,355 $20,963
======= =======

See accompanying Notes to Consolidated Financial Statements.

B-18

UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN MILLIONS, EXCEPT SHARE DATA)

DECEMBER 31
-------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
------------------------------------ -------- --------

Current liabilities:
Notes payable............................................. $ -- $ 61
Long-term debt maturing within one year................... 170 92
Current obligations under capital leases.................. 269 190
Advance ticket sales...................................... 1,454 1,412
Accounts payable.......................................... 1,188 967
Accrued salaries, wages and benefits...................... 1,508 1,002
Accrued aircraft rent..................................... 840 783
Other accrued liabilities................................. 1,352 904
------- -------
6,781 5,411
------- -------
Long-term debt.............................................. 4,688 2,650
------- -------
Long-term obligations under capital leases.................. 2,261 2,337
------- -------
Other liabilities and deferred credits:
Deferred pension liability................................ 136 70
Postretirement benefit liability.......................... 1,557 1,489
Deferred gains............................................ 912 986
Accrued aircraft rent..................................... 408 390
Deferred income taxes..................................... 1,241 1,147
Other..................................................... 511 339
------- -------
4,765 4,421
------- -------
Commitments and contingent liabilities (Note 18)
Company-obligated mandatorily redeemable preferred
securities of a subsidiary trust.......................... 99 100
------- -------
Preferred stock committed to Supplemental ESOP.............. 571 893
------- -------
Stockholders' equity:
Serial preferred stock (Note 12).......................... -- --
ESOP preferred stock (Note 13)............................ -- --
Common stock at par, $0.01 par value; authorized
200,000,000 shares;issued 68,834,167 shares at December
31, 2000 and 65,771,802 shares at December 31, 1999..... 1 1
Additional capital invested............................... 4,530 4,099
Retained earnings......................................... 1,998 2,138
Unearned ESOP preferred stock............................. -- (28)
Stock held in treasury, at cost --
Preferred, 10,213,519 depositary shares at December 31,
2000 and 1999 (Note 12)............................... (305) (305)
Common, 16,295,475 shares at December 31, 2000 and
14,995,219 shares at December 31, 1999................ (1,179) (1,097)
Accumulated other comprehensive income.................... 152 352
Other..................................................... (7) (9)
------- -------
5,190 5,151
------- -------
$24,355 $20,963
======= =======

See accompanying Notes to Consolidated Financial Statements.

B-19

UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN MILLIONS)

YEAR ENDED DECEMBER 31
------------------------------
2000 1999 1998
-------- -------- --------

Cash and cash equivalents at beginning of year............ $ 310 $ 390 $ 295
------- ------ ------
Cash flows from operating activities:
Net earnings............................................ 50 1,235 821
Adjustments to reconcile to net cash provided by
operating activities --
ESOP compensation expense............................. 147 756 829
Cumulative effect of accounting change, net of tax.... 209 -- --
Extraordinary loss on debt extinguishment, net of
tax................................................. 6 3 --
Gain on sale of investments........................... (109) (731) --
Investment impairment................................. 61 -- --
Pension funding less than (greater than) expense...... (21) 94 101
Deferred postretirement benefit expense............... 153 65 149
Depreciation and amortization......................... 1,058 867 793
Provision for deferred income taxes................... 317 590 307
Undistributed (earnings) losses of affiliates......... 13 (20) (62)
Decrease (increase) in receivables.................... 68 (146) (97)
Decrease (increase) in other current assets........... (208) 2 105
Increase (decrease) in advance ticket sales........... 42 (17) 162
Increase (decrease) in accrued income taxes........... (77) (76) 38
Increase (decrease) in accounts payable and accrued
liabilities......................................... 761 (86) 69
Amortization of deferred gains........................ (66) (66) (64)
Other, net............................................ 68 (49) 43
------- ------ ------
2,472 2,421 3,194
------- ------ ------
Cash flows from investing activities:
Additions to property and equipment................... (2,538) (2,389) (2,832)
Proceeds on disposition of property and equipment..... 324 154 452
Proceeds on sale of investments....................... 147 828 --
Decrease (increase) in short-term investments......... (286) 46 125
Other, net............................................ (168) (263) (63)
------- ------ ------
(2,521) (1,624) (2,318)
------- ------ ------
Cash flows from financing activities:
Reacquisition of preferred stock...................... -- -- (3)
Repurchase of common stock............................ (81) (261) (459)
Proceeds from issuance of long-term debt.............. 2,515 286 928
Repayment of long-term debt........................... (441) (513) (271)
Principal payments under capital leases............... (283) (248) (322)
Purchase of equipment certificates under Company
leases.............................................. (208) (47) (693)
Decrease in equipment certificates under Company
leases.............................................. 228 33 22
Increase (decrease) in short-term borrowings.......... (61) (123) 184
Aircraft lease deposits............................... (138) (20) (154)
Cash dividends........................................ (118) (10) (10)
Other, net............................................ 5 26 (3)
------- ------ ------
1,418 (877) (781)
------- ------ ------
Increase (decrease) in cash and cash equivalents during
the year................................................ 1,369 (80) 95
------- ------ ------
Cash and cash equivalents at end of year.................. $ 1,679 $ 310 $ 390
======= ====== ======

See accompanying Notes to Consolidated Financial Statements.

B-20

UAL CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY

(IN MILLIONS, EXCEPT PER SHARE)

UNEARNED ACCUMULATED
ADDITIONAL ESOP OTHER
PREFERRED COMMON CAPITAL RETAINED PREFERRED TREASURY COMP.
STOCK STOCK INVESTED EARNINGS STOCK STOCK INCOME OTHER
--------- -------- ---------- -------- --------- -------- ------------ --------

Balance at December 31, 1997... $ -- $1 $2,876 $ 309 $(177) $ (663) $ (2) $(7)
--------- -- ------ ------ ----- ------- ---- ---
Year ended December 31, 1998:
Net earnings................. -- -- -- 821 -- -- -- --
Other comprehensive income,
net:
Unrealized gains on
securities, net.......... -- -- -- -- -- -- 1 --
Minimum pension liability
adj...................... -- -- -- -- -- -- (1) --
------ ----
Total comprehensive income... -- -- -- 821 -- -- -- --
------ ----
Cash dividends on preferred
stock($1.44 per Series B
share)....................... -- -- -- (10) -- -- -- --
Common stock repurchases....... -- -- -- -- -- (459) -- --
Issuance and amortization of
ESOP preferred stock......... -- -- 823 -- 6 -- -- --
ESOP dividend ($8.89 per
share)....................... -- -- 42 (92) 50 -- -- --
Preferred stock committed to
Supplemental ESOP............ -- -- (177) -- -- -- -- --
Other.......................... -- -- (47) -- -- (18) -- 5
--------- -- ------ ------ ----- ------- ---- ---
Balance at December 31, 1998... -- 1 3,517 1,028 (121) (1,140) (2) (2)
--------- -- ------ ------ ----- ------- ---- ---
Year ended December 31, 1999:
Net earnings................. -- -- -- 1,235 -- -- -- --
Other comprehensive income,
net:
Unrealized gains on
securities, net.......... -- -- -- -- -- -- 354 --
------ ----
Total comprehensive income... -- -- -- 1,235 -- -- 354 --
------ ----
Cash dividends on preferred
stock($1.44 per Series B
share)....................... -- -- -- (10) -- -- -- --
Common stock repurchases....... -- -- -- -- -- (261) -- --
Issuance and amortization of
ESOP preferred stock......... -- -- 740 -- 16 -- -- --
ESOP dividend ($8.89 per
share)....................... -- -- 38 (115) 77 -- -- --
Preferred stock committed to
Supplemental ESOP............ -- -- (201) -- -- -- -- --
Other.......................... -- -- 5 -- -- (1) -- (7)
--------- -- ------ ------ ----- ------- ---- ---
Balance at December 31, 1999... -- 1 4,099 2,138 (28) (1,402) 352 (9)
--------- -- ------ ------ ----- ------- ---- ---
Year ended December 31, 2000:
Net earnings................. -- -- -- 50 -- -- -- --
Other comprehensive income,
net:
Unrealized losses on
securities, net.......... -- -- -- -- -- -- (196) --
Minimum pension liability
adj...................... -- -- -- -- -- -- (4) --
------ ----
Total comprehensive income... -- -- -- 50 -- -- (200) --
------ ----
Cash dividends on preferred
stock($1.44 per Series B
share)....................... -- -- -- (10) -- -- -- --
Cash dividends on common stock
($1.25 per share)............ -- -- -- (144) -- -- -- --
Common stock repurchases....... -- -- -- -- -- (81) -- --
Issuance and amortization of
ESOP preferred stock......... -- -- 147 -- -- -- -- --
ESOP dividend ($8.89 per
share)....................... -- -- 8 (36) 28 -- -- --
Preferred stock committed to
Supplemental ESOP............ -- -- 322 -- -- -- -- --
Other.......................... -- -- (46) -- -- (1) -- 2
--------- -- ------ ------ ----- ------- ---- ---
Balance at December 31, 2000... $ -- $1 $4,530 $1,998 $ -- $(1,484) $152 $(7)
========= == ====== ====== ===== ======= ==== ===

TOTAL
--------

Balance at December 31, 1997... $2,337
------
Year ended December 31, 1998:
Net earnings................. 821
Other comprehensive income,
net:
Unrealized gains on
securities, net.......... 1
Minimum pension liability
adj...................... (1)
------
Total comprehensive income... 821
------
Cash dividends on preferred
stock($1.44 per Series B
share)....................... (10)
Common stock repurchases....... (459)
Issuance and amortization of
ESOP preferred stock......... 829
ESOP dividend ($8.89 per
share)....................... --
Preferred stock committed to
Supplemental ESOP............ (177)
Other.......................... (60)
------
Balance at December 31, 1998... 3,281
------
Year ended December 31, 1999:
Net earnings................. 1,235
Other comprehensive income,
net:
Unrealized gains on
securities, net.......... 354
------
Total comprehensive income... 1,589
------
Cash dividends on preferred
stock($1.44 per Series B
share)....................... (10)
Common stock repurchases....... (261)
Issuance and amortization of
ESOP preferred stock......... 756
ESOP dividend ($8.89 per
share)....................... --
Preferred stock committed to
Supplemental ESOP............ (201)
Other.......................... (3)
------
Balance at December 31, 1999... 5,151
------
Year ended December 31, 2000:
Net earnings................. 50
Other comprehensive income,
net:
Unrealized losses on
securities, net.......... (196)
Minimum pension liability
adj...................... (4)
------
Total comprehensive income... (150)
------
Cash dividends on preferred
stock($1.44 per Series B
share)....................... (10)
Cash dividends on common stock
($1.25 per share)............ (144)
Common stock repurchases....... (81)
Issuance and amortization of
ESOP preferred stock......... 147
ESOP dividend ($8.89 per
share)....................... --
Preferred stock committed to
Supplemental ESOP............ 322
Other.......................... (45)
------
Balance at December 31, 2000... $5,190
======

See accompanying Notes to Consolidated Financial Statements.

B-21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) BASIS OF PRESENTATION -- UAL Corporation ("UAL") is a holding company
whose principal subsidiary is United Air Lines, Inc. ("United"). The
consolidated financial statements include the accounts of UAL and all of its
majority-owned affiliates (collectively "the Company"). All significant
intercompany transactions are eliminated. Certain prior-year financial statement
items have been reclassified to conform to the current year's presentation.

(b) USE OF ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

(c) AIRLINE REVENUES -- Passenger fares and cargo revenues are recorded as
operating revenues when the transportation is furnished. The value of unused
passenger tickets is included in current liabilities.

(d) CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS -- Cash in excess
of operating requirements is invested in short-term, highly liquid,
income-producing investments. Investments with a maturity of three months or
less on their acquisition date are classified as cash and cash equivalents.
Other investments are classified as short-term investments.

From time to time, United lends certain of its securities classified as cash
and cash equivalents and short-term investments to third parties. United
requires collateral in an amount exceeding the value of the securities and is
obligated to reacquire the securities at the end of the contract. United
accounts for these transactions as secured borrowings rather than sales and does
not remove the securities from the balance sheet. At December 31, 2000, United
was obligated to repurchase $39 million of securities lent to third parties.

At December 31, 2000 and 1999, $598 million and $406 million, respectively,
of investments in debt securities included in cash and cash equivalents and
short-term investments were classified as available-for-sale, and $1.7 billion
and $177 million, respectively, were classified as held-to-maturity. Investments
in debt securities classified as available-for-sale are stated at fair value
based on the quoted market prices for the securities, which does not differ
significantly from their cost basis. Investments classified as held-to-maturity
are stated at cost which approximates market due to their short-term maturities.
The proceeds from sales of available-for-sale securities are included in
interest income for each respective year.

(e) DERIVATIVE FINANCIAL INSTRUMENTS --

FOREIGN CURRENCY -- From time to time, United enters into Japanese yen
forward exchange contracts to minimize gains and losses on the revaluation of
short-term yen-denominated liabilities. The yen forwards typically have
short-term maturities and are marked to fair value at the end of each accounting
period. The unrealized mark-to-market

B-22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
gains and losses on the yen forwards generally offset the losses and gains
recorded on the yen liabilities.

United has also entered into forwards and swaps to reduce exposure to
currency fluctuations on Japanese yen-, euro- and French franc-denominated
capital lease obligations. The cash flows of the forwards and swaps mirror those
of the capital leases. The premiums on the forwards and swaps, as measured at
inception, are being amortized over their respective lives as components of
interest expense. Any gains or losses realized upon early termination of these
forwards and swaps are deferred and recognized in income over the remaining life
of the underlying exposure.

The Company hedges some of the risks of exchange rate volatility on its
anticipated future Japanese yen, euro, Australian dollar and British pound
revenues by purchasing put options with little or no intrinsic value and on Hong
Kong dollar revenues by entering into forward contracts. The amount and duration
of these options are synchronized with the expected revenues, and thus, the put
options have been designated as a hedge. The premiums on purchased option
contracts are amortized over the lives of the contracts. Unrealized gains on
purchased put option contracts are deferred until contract expiration and then
recognized as a component of passenger revenue. To reduce hedging costs, the
Company sells a correlation option in the first four currencies referred to
above. The unrealized mark-to-market gains and losses on the correlation options
are included in "Miscellaneous, net," net of premiums received.

INTEREST RATES -- United may from time to time, enter into swaps to reduce
exposure to interest rate fluctuations in connection with certain debt, capital
leases and operating leases. The cash flows of the swaps mirror those of the
underlying exposures. The premiums on the swaps, as measured at inception, are
amortized over their respective lives as components of interest expense. Any
gains or losses realized upon the early termination of these swaps are deferred
and recognized in income over the remaining life of the underlying exposure.

AIRCRAFT FUEL -- Under favorable market conditions, United uses purchased
call options to hedge a portion of its price risk related to aircraft fuel
purchases. The purchased call options have been designated as a hedge. Gains or
losses on hedge positions, net of premiums paid, are recognized upon contract
expiration as a component of aircraft fuel inventory. In addition, to a limited
extent, United trades short-term heating oil futures contracts. Unrealized
losses on these contracts are recorded currently in income while unrealized
gains are deferred until contract expiration. Both gains and losses are recorded
as a component of aircraft fuel expense.

(f) AIRCRAFT FUEL, SPARE PARTS AND SUPPLIES -- Aircraft fuel and maintenance
and operating supplies are stated at average cost. Flight equipment spare parts
are stated at average cost less an obsolescence allowance.

(g) OPERATING PROPERTY AND EQUIPMENT -- Owned operating property and
equipment is stated at cost. Property under capital leases, and the related
obligation for future lease

B-23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
payments, are initially recorded at an amount equal to the then present value of
those lease payments.

Depreciation and amortization of owned depreciable assets is based on the
straight-line method over their estimated service lives. Leasehold improvements
are amortized over the remaining period of the lease or the estimated service
life of the related asset, whichever is less. Aircraft are depreciated to
estimated salvage values, generally over lives of 4 to 30 years; buildings are
depreciated over lives of 25 to 45 years; and other property and equipment are
depreciated over lives of 3 to 15 years.

Properties under capital leases are amortized on the straight-line method
over the life of the lease, or in the case of certain aircraft, over their
estimated service lives. Lease terms are 10 to 30 years for aircraft and flight
simulators and 25 years for buildings. Amortization of capital leases is
included in depreciation and amortization expense.

Maintenance and repairs, including the cost of minor replacements, are
charged to maintenance expense accounts. Costs of additions to and renewals of
units of property are charged to property and equipment accounts.

(h) INTANGIBLES -- Intangibles consist primarily of route acquisition costs
and intangible pension assets (see Note 16, "Retirement and Postretirement
Plans"). Route acquisition costs are amortized over 40 years. During 2001, the
FASB issued an Exposure Draft "Business Combinations and Intangible
Assets -- Accounting for Goodwill" which could impact the Company's accounting
for intangible assets. See OTHER INFORMATION, "New Accounting Pronouncements" in
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

(i) MILEAGE PLUS AWARDS -- United accrues the estimated incremental cost of
providing free travel awards earned under its Mileage Plus frequent flyer
program when such award levels are reached. United, through its wholly owned
subsidiary, Mileage Plus Holdings, Inc., sells mileage credits to participating
partners in the Mileage Plus program.

Effective January 1, 2000, the Company changed its method of accounting for
the sale of mileage to participating partners in its Mileage Plus program, in
accordance with Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements." Under the new accounting method, a portion of revenue
from the sale of mileage (previously recognized in other revenue) is deferred
and recognized as passenger revenue when the transportation is provided.
Accordingly, UAL has recorded a charge of $209 million, net of tax, for the
cumulative effect of a change in accounting principle to reflect the application
of the accounting method to prior years. This change resulted in a reduction to
revenues of approximately $38 million for 2000 and would have reduced 1999
revenues by $45 million.

B-24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The pro forma effect of the accounting change on net income and earnings per
share as previously reported for 1999 and prior years is as follows:

1999 1998 1997 1996 1995
-------- -------- -------- -------- --------

Earnings before extraordinary items
(in millions)...................... As reported $1,238 $ 821 $ 958 $ 600 $ 378
Pro forma $1,209 $ 774 $ 931 $ 553 $ 348

Earnings per share before
extraordinary items
Basic.............................. As reported $21.26 $12.71 $14.98 $8.76 $6.98
Pro forma $20.71 $11.87 $14.52 $7.92 $6.37
Diluted............................ As reported $ 9.97 $ 6.83 $ 9.04 $5.85 $5.23
Pro forma $ 9.71 $ 6.38 $ 8.76 $5.29 $4.81

Net earnings (in millions)........... As reported $1,235 $ 821 $ 949 $ 533 $ 349
Pro forma $1,206 $ 774 $ 922 $ 486 $ 319

Net earnings per share
Basic.............................. As reported $21.20 $12.71 $14.83 $7.57 $6.39
Pro forma $20.65 $11.87 $14.37 $6.73 $5.78
Diluted............................ As reported $ 9.94 $ 6.83 $ 8.95 $5.06 $4.82
Pro forma $ 9.68 $ 6.38 $ 8.67 $4.50 $4.40

(j) DEFERRED GAINS -- Gains on aircraft sale and leaseback transactions are
deferred and amortized over the lives of the leases as a reduction of rental
expense.

(k) ADVERTISING -- Advertising costs, which are included in other operating
expenses, are expensed as incurred. Advertising expense was $269 million,
$232 million and $213 million for the years ended December 31, 2000, 1999 and
1998, respectively.

(2) EMPLOYEE STOCK OWNERSHIP PLANS AND RECAPITALIZATION

On July 12, 1994, the stockholders of UAL approved a plan of
recapitalization to provide an approximately 55% equity interest in UAL to
certain employees of United in exchange for wage concessions and work-rule
changes. The employees' equity interest was allocated to individual employees
through the year 2000 under Employee Stock Ownership Plans ("ESOPs") which were
created as a part of the recapitalization.

The ESOPs cover employees represented by ALPA, the IAM and U.S. management
and salaried employees. The ESOPs include a "Leveraged ESOP," a "Non-Leveraged
ESOP" and a "Supplemental ESOP." Both the Leveraged ESOP and the Non-Leveraged
ESOP are tax-qualified plans while the Supplemental ESOP is not a tax-qualified
plan. Shares are delivered to employees primarily through the Leveraged ESOP,
then through the Non-Leveraged ESOP, and finally, through the Supplemental ESOP.

The equity interests were delivered to employees through two classes of
preferred stock (Class 1 and Class 2 ESOP Preferred Stock, collectively "ESOP
Preferred Stock"), and the

B-25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) EMPLOYEE STOCK OWNERSHIP PLANS AND RECAPITALIZATION (CONTINUED)
voting interests were delivered through three separate classes of preferred
stocks (Class P, M and S Voting Preferred Stock, collectively, "Voting Preferred
Stock"). The Class 1 ESOP Preferred Stock was delivered to an ESOP trust in
seven separate sales under the Leveraged ESOP, the last of which occurred on
January 5, 2000. Based on Internal Revenue Code Limitations, shares of the
Class 2 ESOP Preferred Stock are either contributed to the Non-Leveraged ESOP or
allocated as "book entry" shares to the Supplemental ESOP annually through the
year 2000. The classes of preferred stock are described more fully in Note 13,
"ESOP Preferred Stock."

The Leveraged ESOP and Non-Leveraged ESOP are being accounted for under
AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans." For the Leveraged ESOP, as shares of Class 1 ESOP Preferred
Stock are sold to an ESOP trust, the Company reports the issuance as a credit to
additional capital invested and records a corresponding charge to unearned ESOP
preferred stock. ESOP compensation expense is recorded for the average fair
value of the shares committed to be released during the period with a
corresponding credit to unearned ESOP preferred stock for the cost of the
shares. Any difference between the fair value of the shares and the cost of the
shares is charged or credited to additional capital invested. For the
Non-Leveraged ESOP, the Class 2 ESOP Preferred Stock is recorded as additional
capital invested as the shares are committed to be contributed, with the
offsetting charge to ESOP compensation expense. The ESOP compensation expense is
based on the average fair value of the shares committed to be contributed. The
Supplemental ESOP is being accounted for under Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25").

Shares of ESOP Preferred Stock are legally released or allocated to employee
accounts as of year-end. Dividends on the ESOP Preferred Stock are also paid at
the end of the year. Dividends on unallocated shares are used by the ESOP to pay
down the loan from UAL and are not considered dividends for financial reporting
purposes. Dividends on allocated shares are satisfied by releasing shares from
the ESOP's suspense account to the employee accounts and are charged to equity.

During 2000, 2,390,931 shares of Class 1 ESOP Preferred Stock, 434,465
shares of Class 2 ESOP Preferred Stock and 2,819,479 shares of Voting Preferred
Stock were allocated to employee accounts, and another 248,572 shares of
Class 2 ESOP Preferred Stock were allocated in the form of "book entry" shares,
effective December 31, 1999. Another 198,629 shares of Class 2 ESOP Preferred
Stock previously allocated in book entry form were issued and either contributed
to the qualified plan or converted and sold on behalf of terminating employees.
At December 31, 2000, the year-end allocation of Class 1 ESOP Preferred Stock to
employee accounts had not yet been completed; however, there were 669,820 shares
of Class 1 ESOP Preferred Stock committed to be released. For the Class 2 ESOP
Preferred Stock, 187,276 shares were committed to be contributed to employees at
December 31, 2000. The fair value of the unearned ESOP shares recorded on the
balance sheet at December 31, 1999 was $41 million.

B-26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) EMPLOYEE STOCK OWNERSHIP PLANS AND RECAPITALIZATION (CONTINUED)
For the Class 2 ESOP Preferred Stock committed to be contributed to
employees under the Supplemental ESOP, employees can elect to receive their
"book entry" shares in cash upon termination of employment. The estimated fair
value of such shares at December 31, 2000 and 1999 was $304 million and
$954 million, respectively.

(3) OTHER INCOME (EXPENSE) -- MISCELLANEOUS

Included in Other income (expense) -- "Miscellaneous, net" was $(22)
million, $4 million and $(84) million in foreign exchange gains (losses) in
2000, 1999 and 1998, respectively.

(4) OTHER COMPREHENSIVE INCOME

The following table presents the tax effect of those items included in other
comprehensive income:

YEAR ENDED DECEMBER 31
---------------------------------------------------------------------------------------------------
2000 1999 1998
------------------------------ ------------------------------ ---------------------------------
TAX NET OF TAX NET OF TAX NET OF
(IN MILLIONS) PRE-TAX EFFECT TAX PRE-TAX EFFECT TAX PRE-TAX EFFECT TAX
------------- -------- -------- -------- -------- -------- -------- --------- --------- ---------

Unrealized holding gains
(losses) arising during
period.................... $(297) $101 $(196) $547 $(193) $354 $ 1 $ -- $ 1
Minimum pension liability... (6) 2 (4) -- -- -- (1) -- (1)
----- ---- ----- ---- ----- ---- --------- --------- ---------
Total other comprehensive
income.................... $(303) $103 $(200) $547 $(193) $354 $ -- $ -- $ --
===== ==== ===== ==== ===== ==== ========= ========= =========

Unrealized gains (losses) on securities primarily represent gains (losses)
on the Company's investments in Galileo and Equant as discussed in Note 6
"Investments."

(5) PER SHARE AMOUNTS

Basic earnings per share were computed by dividing net income before
extraordinary item and cumulative effect by the weighted-average number of
shares of common stock outstanding during the year. In addition, diluted
earnings per share amounts include

B-27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5) PER SHARE AMOUNTS (CONTINUED)
potential common shares, including common shares issuable upon conversion of
ESOP shares committed to be released.

EARNINGS ATTRIBUTABLE TO COMMON STOCKHOLDERS (IN MILLIONS) 2000 1999 1998
---------------------------------------------------------- -------- -------- --------

Net income before extraordinary item and cumulative
effect................................................... $ 265 $1,238 $ 821
Preferred stock dividends.................................. (46) (125) (102)
----- ------ ------
Earnings attributable to common stockholders (Basic and
Diluted)................................................. $ 219 $1,113 $ 719
===== ====== ======

SHARES (MILLIONS)
-----------------
Weighted average shares outstanding (Basic)................ 51.3 52.3 56.5
Convertible ESOP preferred stock........................... 64.5 58.0 47.1
Other...................................................... 0.7 1.3 1.6
----- ------ ------
Weighted average number of shares (Diluted)................ 116.5 111.6 105.2
===== ====== ======

EARNINGS PER SHARE
------------------
Basic...................................................... $4.29 $21.26 $12.71
Diluted.................................................... $1.89 $ 9.97 $ 6.83

At December 31, 2000, stock options to purchase 5,646,557 shares of common
stock were outstanding, but were not included in the computation of diluted
earnings per share, because the exercise price of these options was greater than
the average market price of the common shares.

(6) INVESTMENTS

During 2000, UAL invested approximately $24 million in Orbitz, an entity
which is developing an Internet travel web site. UAL owns approximately 25% of
Orbitz and accounts for this investment using the equity method of accounting.

During 1998 and 1999, United invested approximately $51 million in
GetThere.com (a leading provider of Internet-based travel planning products
tailored to individual, corporate, travel supplier and travel agency customers)
resulting in a 28% minority interest consisting of common stock, warrants and
options. United accounted for its investment in GetThere.com using the equity
method of accounting.

On October 6, 2000, Sabre Holdings Corporation acquired all of the
outstanding common stock of GetThere.com for $17.75 per share. Accordingly,
after converting its options and warrants, United tendered all of its shares for
net proceeds of $147 million, resulting in a gain of approximately $69 million,
net of tax.

During 2000, United recorded an impairment loss of $38 million, net of tax,
related to its warrants held in Priceline.com.

In June 1999, United sold 17,500,000 common shares of Galileo in a secondary
offering for $766 million, resulting in a gain of approximately $428 million,
net of tax. This sale

B-28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) INVESTMENTS (CONTINUED)
reduced United's holdings in Galileo from 32 percent to approximately
15 percent, requiring United to discontinue the equity method of accounting for
its investment in Galileo. United has classified its remaining 15,940,000 shares
of Galileo common stock as available-for-sale. The market value of these shares
at December 31, 2000 ($319 million) is reflected in Investments on the balance
sheet and the market value in excess of United's investment is classified
net-of-tax ($144 million) in Accumulated Other Comprehensive Income. The market
value of United's investment in Galileo at December 31, 1999 was $477 million.
Included in the Company's retained earnings is approximately $248 million of
undistributed earnings of Galileo and its predecessor companies.

United owns 1,391,791 depositary certificates in Equant, a provider of
international data network services to multinational businesses and a single
source for global desktop communications. Each depositary certificate represents
a beneficial interest in an Equant common share and the investment is classified
as available-for-sale. The market value in excess of United's investment is
classified net-of-tax ($24 million) in Accumulated Other Comprehensive Income.
In December 1999, United sold 709,000 shares of common stock in Equant in a
secondary offering by Equant for $62 million. At December 31, 2000 and 1999, the
estimated fair value of United's remaining investment in Equant was
approximately $36 million and $156 million, respectively.

(7) INCOME TAXES

In 2000, UAL incurred both a regular and an alternative minimum tax ("AMT")
loss. The carryback of the regular tax loss to 1999 and 1998 and the carryback
loss of the AMT loss to 1998 will produce both federal and state refunds and
generate additional AMT credits. The primary differences between UAL's regular
tax loss and AMT loss are the depreciation adjustments and preferences.

The provision for income taxes is summarized as follows:

(IN MILLIONS) 2000 1999 1998
------------- -------- -------- --------

Current --
Federal................................................... $(133) $ 93 $113
State..................................................... (24) 16 9
----- ---- ----
(157) 109 122
----- ---- ----

Deferred --
Federal................................................... 278 536 270
State..................................................... 39 54 37
----- ---- ----
317 590 307
----- ---- ----
$ 160 $699 $429
===== ==== ====

B-29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES (CONTINUED)

The income tax provision differed from amounts computed at the statutory
federal income tax rate, as follows:

(IN MILLIONS) 2000 1999 1998
------------- -------- -------- --------

Income tax provision at statutory rate...................... $151 $680 $440
State income taxes, net of federal income tax benefit....... 10 46 30
ESOP dividends.............................................. (32) (40) (33)
Nondeductible employee meals................................ 24 24 24
Tax credits................................................. -- -- (7)
Other, net.................................................. 7 (11) (25)
---- ---- ----
$160 $699 $429
==== ==== ====

Temporary differences and carryforwards that give rise to a significant
portion of deferred tax assets and liabilities for 2000 and 1999 are as follows:

2000 1999
--------------------------- ---------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
(IN MILLIONS) ASSETS LIABILITIES ASSETS LIABILITIES
------------- ------------ ------------ ------------ ------------

Employee benefits, including
postretirement medical and
ESOP.......................... $1,076 $ 214 $ 990 $ 135
Depreciation, capitalized
interest and transfers of tax
benefits...................... -- 3,009 -- 2,489
Gains on sale and leasebacks.... 307 -- 335 --
Rent expense.................... 461 -- 435 --
AMT credit carryforwards........ 371 -- 210 --
Other........................... 1,012 1,020 758 1,029
------ ------ ------ ------
$3,227 $4,243 $2,728 $3,653
====== ====== ====== ======

At December 31, 2000, UAL and its subsidiaries had $371 million of federal
AMT credits and $43 million of federal and state net operating losses which may
be carried forward to reduce the tax liabilities of future years.

(8) SHORT-TERM BORROWINGS

United has an agreement with a syndicate of banks for a $750 million
revolving credit facility expiring in 2002. Interest on drawn amounts under the
facility is calculated at floating rates based on the London interbank offered
rate ("LIBOR") plus a margin which is subject to adjustment based on certain
changes in the credit ratings of United's long-term senior unsecured debt. Among
other restrictions, the credit facility contains a covenant that restricts
United's ability to grant liens on or otherwise encumber certain identified
assets with a market value of approximately $1.1 billion.

B-30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(8) SHORT-TERM BORROWINGS (CONTINUED)
Additionally, United has available $900 million in short-term secured
aircraft financing facilities. Interest on drawn amounts under the facilities is
calculated at floating rates based on LIBOR plus a margin.

At December 31, 1999, United had outstanding $61 million under a separate
short-term borrowing facility, bearing an average interest rate of 5.72%.
Receivables amounting to $233 million were pledged by United to secure repayment
of such outstanding borrowings. The maximum available borrowing amount under
this arrangement is $227 million. There were no borrowings outstanding under
this arrangement at December 31, 2000.

(9) LONG-TERM DEBT

A summary of long-term debt, including current maturities, as of
December 31 is as follows (interest rates are as of December 31, 2000):

(IN MILLIONS) 2000 1999
------------- -------- --------

Secured notes, 5.97% to 8.99%, averaging 7.33%, due through
2014...................................................... $3,417 $1,229
Debentures, 9.00% to 11.21%, averaging 9.89%, due through
2021...................................................... 646 762
Promissory notes, 11.00%, due 2000.......................... -- 1
Commercial paper, 6.71%, due through 2003................... 549 571
Special facility bonds, 5.63% to 6.25%, averaging 5.71%,
due through 2034.......................................... 255 190
------ ------
4,867 2,753
------ ------

Less: Unamortized discount on debt.......................... (9) (11)
Current maturities..................................... (170) (92)
------ ------
$4,688 $2,650
====== ======

See "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" ("Market
Risk Disclosures") for disclosures regarding the fair values of debt.

In addition to scheduled principal payments, in 2000 and 1999 the Company
repaid $116 million and $23 million, respectively, in principal amount of
debentures prior to maturity. The debentures were scheduled to mature at various
times through 2021. Extraordinary losses of $6 million and $3 million,
respectively, net of tax benefits of $4 million and $2 million, respectively,
was recorded reflecting amounts paid in excess of the debt carrying value.

The Company, through a special-purpose financing entity that is
consolidated, has issued commercial paper to refinance certain lease
commitments. Although the issued commercial paper has short maturities, the
Company expects to continually rollover this obligation throughout the 5-year
life of its supporting liquidity facility or bank standby facility. As such, the
commercial paper is classified as a long-term obligation in the Company's
statement of financial position.

B-31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(9) LONG-TERM DEBT (CONTINUED)
In July 2000, the Company issued $921 billion in enhanced equipment trust
certificates to refinance certain owned aircraft and aircraft under operating
leases. Net proceeds after refinancing the operating leases was $622 million. In
December 2000, the Company issued an additional $1.5 billion in enhanced
equipment trust certificates to refinance certain owned aircraft.

At December 31, 2000, United had recorded $255 million in special facilities
revenue bonds to finance the acquisition and construction of certain facilities
at Los Angeles, San Francisco and Miami. United guarantees the payment of these
bonds under various payment and loan agreements. The bond proceeds are
restricted to expenditures on the facilities and unspent amounts are classified
as other assets in the balance sheet.

In February 2001, United recorded an additional $200 million in special
facility bonds to finance the acquisition and construction of certain facilities
at Chicago.

At December 31, 2000, United had outstanding a total of $1.4 billion of
long-term debt bearing interest rates at 22.5 to 60.0 basis points over LIBOR.

Maturities of long-term debt for each of the four years after 2001 are:
2002 -- $655 million; 2003 -- $741 million; 2004 -- $350 million; and
2005 -- $264 million. Various assets, principally aircraft, having an aggregate
book value of $4.1 billion at December 31, 2000, were pledged as security under
various loan agreements.

(10) LEASE OBLIGATIONS

The Company leases aircraft, airport passenger terminal space, aircraft
hangars and related maintenance facilities, cargo terminals, other airport
facilities, real estate, office and computer equipment and vehicles.

B-32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(10) LEASE OBLIGATIONS (CONTINUED)
Future minimum lease payments as of December 31, 2000, under capital leases
(substantially all of which are for aircraft) and operating leases having
initial or remaining noncancelable lease terms of more than one year are as
follows:

OPERATING LEASES
----------------------- CAPITAL
(IN MILLIONS) AIRCRAFT NON-AIRCRAFT LEASES
------------- -------- ------------ --------

Payable during --
2001.............................................. $ 941 $ 612 $ 472
2002.............................................. 922 574 415
2003.............................................. 972 541 316
2004.............................................. 1,008 514 325
2005.............................................. 1,022 504 293
After 2005........................................ 9,445 7,279 1,867
------- ------- -------
Total minimum lease payments........................ $14,310 $10,024 3,688
======= =======
Imputed interest (at rates of 5.3% to 12.2%)........ (1,158)
-------
Present value of minimum lease payments............. 2,530
Current portion..................................... (269)
-------
Long-term obligations under capital leases.......... $ 2,261
=======

As of December 31, 2000, United leased 315 aircraft, 82 of which were under
capital leases. These leases have terms of 10 to 26 years, and expiration dates
range from 2001 through 2020.

In connection with the financing of certain aircraft accounted for as
capital leases, United had on deposit at December 31, 2000 an aggregate
40 billion yen ($348 million), 661 million German marks ($314 million),
67 million French francs ($10 million), 28 million euro ($26 million) and
$12 million in certain banks and had pledged an irrevocable security interest in
such deposits to certain of the aircraft lessors. These deposits will be used to
pay off an equivalent amount of recorded capital lease obligations.

Amounts charged to rent expense, net of minor amounts of sublease rentals,
were $1.5 billion in 2000, $1.4 billion in 1999 and $1.4 billion in 1998.
Included in 2000 rental expense was $21 million in contingent rentals, resulting
from changes in interest rates for operating leases under which the rent
payments are based on variable interest rates.

B-33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(11) COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF A
SUBSIDIARY TRUST

In December 1996, UAL Corporation Capital Trust I (the "Trust") issued
$75 million of its 13 1/4% Trust Originated Preferred Securities (the "Preferred
Securities") in exchange for 2,999,304 depositary shares, each representing
1/1000 of one share of Series B 12 1/4% preferred stock (see Note 12 "Serial
Preferred Stock"). Concurrent with the issuance of the Preferred Securities and
the related purchase by UAL of the Trust's common securities, the Company issued
to the Trust $77 million aggregate principal amount of its 13 1/4% Junior
Subordinated Debentures (the "Debentures") due 2026. The Debentures are and will
be the sole assets of the Trust. The interest and other payment dates on the
Debentures correspond to the distribution and other payment dates on the
Preferred Securities. Upon maturity or redemption of the Debentures, the
Preferred Securities will be mandatorily redeemed. The Debentures are redeemable
at UAL's option, in whole or in part, on or after July 12, 2004, at a redemption
price equal to 100% of the principal amount to be redeemed, plus accrued and
unpaid interest to the redemption date. Upon the repayment of the Debentures,
the proceeds thereof will be applied to redeem the Preferred Securities.

There is a full and unconditional guarantee by UAL of the Trust's
obligations under the securities issued by the Trust. However, the Company's
obligations are subordinate and junior in right of payment to certain other of
its indebtedness. UAL has the right to defer payments of interest on the
Debentures by extending the interest payment period, at any time, for up to 20
consecutive quarters. If interest payments on the Debentures are so deferred,
distributions on the Preferred Securities will also be deferred. During any
deferral, distributions will continue to accrue with interest thereon. In
addition, during any such deferral, UAL may not declare or pay any dividend or
other distribution on, or redeem or purchase, any of its capital stock.

The fair value of the Preferred Securities at December 31, 2000 and 1999 was
$85 million and $83 million, respectively.

(12) SERIAL PREFERRED STOCK

At December 31, 2000, UAL had outstanding 3,203,177 depositary shares, each
representing 1/1000 of one share of Series B 12 1/4% preferred stock, with a
liquidation preference of $25 per depositary share ($25,000 per Series B
preferred share) and a stated capital of $0.01 per Series B preferred share.
Under its terms, any portion of the Series B preferred stock or the depositary
shares is redeemable for cash after July 11, 2004, at UAL's option, at the
equivalent of $25 per depositary share, plus accrued dividends. The Series B
preferred stock is not convertible into any other securities, has no stated
maturity and is not subject to mandatory redemption.

The Series B preferred stock ranks senior to all other preferred and common
stock, except the Preferred Securities, as to receipt of dividends and amounts
distributed upon liquidation. The Series B preferred stock has voting rights
only to the extent required by law and with respect to charter amendments that
adversely affect the preferred stock or the creation or issuance of any security
ranking senior to the preferred stock. Additionally, if

B-34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(12) SERIAL PREFERRED STOCK (CONTINUED)
dividends are not paid for six cumulative quarters, the Series B preferred
stockholders are entitled to elect two additional members to the UAL Board of
Directors until all dividends are paid in full. Pursuant to UAL's restated
certificate of incorporation, UAL is authorized to issue a total of 50,000
shares of Series B preferred stock.

During 1998, UAL repurchased 64,300 depositary shares, at an aggregate cost
of $3 million, to be held in treasury.

UAL is authorized to issue up to 15,986,584 additional shares of serial
preferred stock.

(13) ESOP PREFERRED STOCK

The following activity related to UAL's outstanding ESOP preferred stocks
(see Note 2 for a description of the ESOPs):

CLASS 1 ESOP CLASS 2 ESOP ESOP VOTING
------------ ------------ -----------

Balance December 31, 1997................. 8,652,618 806,260 7,266,406
---------- --------- ----------
Shares issued........................... 2,011,812 177,166 3,073,969
Converted to common..................... (213,061) (116,104) (331,620)
---------- --------- ----------
Balance December 31, 1998................. 10,451,369 867,322 10,008,755
---------- --------- ----------
Shares issued........................... 1,955,756 227,689 3,073,969
Converted to common..................... (306,662) (146,975) (457,401)
---------- --------- ----------
Balance December 31, 1999................. 12,100,463 948,036 12,625,323
---------- --------- ----------
Shares issued........................... 539,177 855,998 3,073,968
Converted to common..................... (420,958) (283,428) (710,056)
---------- --------- ----------
Balance December 31, 2000................. 12,218,682 1,520,606 14,989,235
========== ========= ==========

An aggregate of 17,675,345 shares of Class 1 and Class 2 ESOP Preferred
Stock was issued to employees under the ESOPs. Each share of ESOP Preferred
Stock is convertible into four shares of UAL common stock. Shares typically are
converted to common as employees retire or otherwise leave the Company. The
stock has a par value of $0.01 per share and is nonvoting. The Class 1 ESOP
Preferred Stock has a liquidation value of $126.96 per share plus all accrued
and unpaid dividends; the Class 2 does not have a liquidation value. The
Class 1 ESOP Preferred Stock provided a fixed annual dividend of $8.8872 per
share, which ceased on March 31, 2000; the Class 2 does not pay a fixed
dividend.

Class P, M and S Voting Preferred Stocks were established to provide the
voting power to the employee groups participating in the ESOPs. Additional
Voting Preferred Stock was issued as shares of the Class 1 and Class 2 ESOP
Preferred Stock were allocated to employees. In the aggregate, 17,675,345 shares
of Voting Preferred Stock were issued through the year 2000. The Voting
Preferred Stock outstanding at any time commands voting power for approximately
55% of the vote of all classes of capital stock in all matters

B-35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(13) ESOP PREFERRED STOCK (CONTINUED)
requiring a stockholder vote, other than for the election of members of the
Board of Directors. The Voting Preferred Stock has a par value and liquidation
preference of $0.01 per share. The stock is not entitled to receive any
dividends and is convertible into .0004 shares of UAL common stock.

Class Pilot MEC, IAM, SAM and I junior preferred stock (collectively
"Director Preferred Stocks") were established to effectuate the election of one
or more members to UAL's Board of Directors. One share each of Class Pilot MEC
and Class IAM junior preferred stock is authorized and issued. The Company is
authorized to issue ten shares each of Class SAM and Class I junior preferred
stock. There are three shares of Class SAM and four shares of Class I issued.
Each of the Director Preferred Stocks has a par value and liquidation preference
of $0.01 per share. The stock is not entitled to receive any dividends and
Class I will be redeemed automatically upon the transfer of the shares to any
person not elected to the Board of Directors or upon the occurrence of the
"Sunset."

(14) COMMON STOCKHOLDERS' EQUITY

Changes in the number of shares of UAL common stock outstanding during the
years ended December 31 were as follows:

2000 1999 1998
---------- ---------- ----------

Shares outstanding at beginning of year......... 50,776,583 51,804,653 57,320,486
Stock options exercised....................... 187,400 939,262 382,136
Shares issued from treasury under compensation
arrangements................................ 32,458 89,745 11,944
Shares acquired for treasury.................. (1,326,877) (3,877,912) (7,237,975)
Forfeiture of restricted stock................ (5,800) (5,800) (7,600)
Conversion of ESOP preferred stock............ 2,817,829 1,814,731 1,316,786
Other......................................... 57,099 11,904 18,876
---------- ---------- ----------
Shares outstanding at end of year............... 52,538,692 50,776,583 51,804,653
========== ========== ==========

During 2000, 1999 and 1998, the Company repurchased 1,258,263, 3,754,802 and
7,061,109 shares of common stock, respectively, at a total purchase price of
$81 million, $261 million and $459 million, respectively.

(15) STOCK OPTIONS AND AWARDS

The Company has granted options to purchase common stock to various officers
and employees. The option price for all stock options is at least 100% of the
fair market value of UAL common stock at the date of grant. Options generally
vest and become exercisable in four equal, annual installments beginning one
year after the date of grant, and generally expire in ten years.

As a result of the 1994 recapitalization, all outstanding options became
fully vested at the time of the transaction and those options are exercisable
for shares of old common

B-36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(15) STOCK OPTIONS AND AWARDS (CONTINUED)
stock, each of which is in turn converted into two shares of new common stock
and $84.81 in cash upon exercise. Subsequent to the recapitalization, the
Company granted stock options which are exercisable for shares of new common
stock.

The Company has also awarded shares of restricted stock to officers and key
employees. These shares generally vest over a five-year period and are subject
to certain transfer restrictions and forfeiture under certain circumstances
prior to vesting. Unearned compensation, representing the fair market value of
the stock at the measurement date for the award, is amortized to salaries and
related costs over the vesting period. During 2000 and 1999, respectively,
23,000 and 75,000 shares of restricted stock were issued from treasury. No
shares were issued in 1998. As of December 31, 2000, 98,000 shares were
restricted and still nonvested. Additionally, 265,952 shares were reserved for
future awards under the plan.

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") establishes a fair value based method
of accounting for stock options. The Company has elected to continue using the
intrinsic value method of accounting prescribed in APB 25, as permitted by SFAS
No. 123. Had compensation cost for awards been determined based on the fair
value at the grant dates consistent with the method of SFAS No. 123, the
Company's net income and earnings per share would have instead been reported as
the pro forma amounts indicated below:

2000 1999 1998
-------- -------- --------

Net income (millions)......................... As reported $ 50 $1,235 $ 821
Pro forma $ 33 $1,219 $ 812

Basic net earnings per share.................. As reported $ 0.08 $21.20 $12.71
Pro forma $(0.24) $20.89 $12.55

Diluted net earnings per share................ As reported $ 0.04 $ 9.94 $ 6.83
Pro forma $(0.10) $ 9.79 $ 6.74

The weighted-average grant date fair value of restricted shares issued was
$51.83 for shares issued in 2000 and $69.51 for shares issued in 1999. The fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:

2000 1999 1998
-------- -------- --------

Risk-free interest rate.................................... 6.4% 5.2% 5.6%
Dividend yield............................................. 2.4% 0.0% 0.0%
Volatility................................................. 35.0% 34.0% 33.0%
Expected life (years)...................................... 4.0 4.0 4.0

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions

B-37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(15) STOCK OPTIONS AND AWARDS (CONTINUED)
including expected stock price volatility. Because the Company's stock options
have characteristics significantly different from those of traded options and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its stock
options.

Stock option activity for the past three years was as follows:

2000 1999 1998
--------------------- --------------------- ---------------------
WTD AVG WTD AVG WTD AVG
SHARES EXER PRICE SHARES EXER PRICE SHARES EXER PRICE
OLD SHARE OPTIONS: -------- ---------- -------- ---------- -------- ----------

Outstanding at beginning of
year......................... 76,350 $116.74 118,475 $121.64 168,393 $121.65
Exercised.................... (26,600) $102.73 (42,125) $130.53 (49,918) $121.67
------- ------- -------
Outstanding at end of year..... 49,750 $124.23 76,350 $116.74 118,475 $121.64

Options exercisable at
year-end..................... 49,750 $124.23 76,350 $116.74 118,475 $121.64

2000 1999 1998
---------------------- ---------------------- ----------------------
WTD AVG WTD AVG WTD AVG
SHARES EXER PRICE SHARES EXER PRICE SHARES EXER PRICE
NEW SHARE OPTIONS: --------- ---------- --------- ---------- --------- ----------

Outstanding at beginning
of year................. 6,513,709 $53.27 5,411,836 $45.07 4,749,612 $36.27
Granted................. 1,447,600 $53.24 2,081,600 $64.29 1,064,200 $81.40
Exercised............... (134,200) $29.91 (855,012) $25.67 (282,300) $28.79
Terminated.............. (261,912) $67.50 (124,715) $70.74 (119,676) $57.12
--------- --------- ---------
Outstanding at end of
year.................... 7,565,197 $53.19 6,513,709 $53.27 5,411,836 $45.07

Options exercisable at
year-end................ 4,101,248 $44.00 3,240,210 $38.26 3,400,607 $29.97

Reserved for future grants
at year-end............. 280,331 1,466,019 3,422,904

Wtd avg fair value of
options granted during
the year................ $17.80 $22.31 $27.95

B-38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(15) STOCK OPTIONS AND AWARDS (CONTINUED)

The following information related to stock options outstanding as of
December 31, 2000:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------- ------------------------------------
WEIGHTED-AVERAGE
RANGE OF OUTSTANDING AT REMAINING WEIGHTED-AVERAGE EXERCISABLE AT WEIGHTED-AVERAGE
EXERCISE PRICES DECEMBER 31, 2000 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 2000 EXERCISE PRICE
--------------- ----------------- ---------------- ---------------- ----------------- ----------------

Old Share Options:
$117 to 153........ 49,750 1.4 years $124.23 49,750 $124.23

New Share Options:
$20 to 29.......... 1,836,040 3.6 years $ 22.82 1,836,040 $ 22.82
$36 to 58.......... 2,527,847 7.5 years $ 52.98 1,116,647 $ 52.67
$60 to 69.......... 1,819,525 8.1 years $ 62.41 473,819 $ 62.82
$70 to 88.......... 1,381,785 7.3 years $ 81.30 674,742 $ 81.04
--------- ---------
7,565,197 4,101,248

(16) RETIREMENT AND POSTRETIREMENT PLANS

The Company has various retirement plans, both defined benefit and defined
contribution, which cover substantially all employees. The Company also provides
certain health care benefits, primarily in the U.S., to retirees and eligible
dependents, as well as certain life insurance benefits to retirees. The Company
has reserved the right, subject to collective bargaining agreements, to modify
or terminate the health care and life insurance benefits for both current and
future retirees.

The following table sets forth the reconciliation of the beginning and
ending balances of the benefit obligation and plan assets, the funded status and
the amounts recognized in the statement of financial position for the defined
benefit and other postretirement plans as of December 31:

PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
(IN MILLIONS) 2000 1999 2000 1999
------------- -------- -------- -------- --------

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year........... $7,381 $8,038 $1,465 $1,626
Service cost...................................... 269 295 47 53
Interest cost..................................... 629 583 120 116
Plan participants' contributions.................. 1 1 8 7
Amendments........................................ 260 1 3 --
Actuarial (gain) loss............................. 1,162 (1,161) 164 (254)
Foreign currency exchange rate changes............ (15) 12 -- --
Benefits paid..................................... (435) (388) (101) (83)
------ ------ ------ ------
Benefit obligation at end of year................. $9,252 $7,381 $1,706 $1,465
====== ====== ====== ======

B-39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(16) RETIREMENT AND POSTRETIREMENT PLANS (CONTINUED)

PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
2000 1999 2000 1999
CHANGE IN PLAN ASSETS -------- -------- -------- --------

Fair value of plan assets at beginning of year... $8,701 $7,654 $ 113 $ 112
Actual return on plan assets..................... 21 1,255 8 6
Employer contributions........................... 230 175 88 71
Plan participants' contributions................. 1 1 8 7
Foreign currency exchange rate changes........... (7) 4 -- --
Benefits paid.................................... (435) (388) (101) (83)
------ ------ ------- -------
Fair value of plan assets at end of year......... $8,511 $8,701 $ 116 $ 113
====== ====== ======= =======
Funded status.................................... $ (741) $1,320 $(1,590) $(1,352)
Unrecognized actuarial (gains) losses............ 14 (1,870) (54) (229)
Unrecognized prior service costs................. 806 604 2 --
------ ------ ------- -------
Net amount recognized............................ $ 79 $ 54 $(1,642) $(1,581)
====== ====== ======= =======
AMOUNTS RECOGNIZED IN THE STATEMENT OF
FINANCIAL POSITION CONSIST OF:
Prepaid (accrued) benefit cost................... $ 79 $ 54 $(1,642) $(1,581)
Accrued benefit liability........................ (266) (151) -- --
Intangible asset................................. 255 148 -- --
Accumulated other comprehensive income........... 11 3 -- --
------ ------ ------- -------
Net amount recognized............................ $ 79 $ 54 $(1,642) $(1,581)
====== ====== ======= =======
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate.................................... 7.75% 8.25% 7.75% 8.25%
Expected return on plan assets................... 9.75% 9.75% 8.00% 8.00%
Rate of compensation increase.................... 4.36% 4.10% -- --

The assumed health care cost trend rates for gross claims paid were 4.5% and
4.0% for 2000 and 1999, respectively.

The net periodic benefit cost included the following components:

PENSION BENEFITS OTHER BENEFITS
------------------------------ ------------------------------
(IN MILLIONS) 2000 1999 1998 2000 1999 1998
------------- -------- -------- -------- -------- -------- --------

Service cost................................ $269 $295 $276 $ 47 $ 53 $ 48
Interest cost............................... 629 583 533 120 116 109
Expected return on plan assets.............. (740) (665) (581) (9) (9) (8)
Amortization of prior service cost including
transition obligation/(asset)............. 58 57 57 -- -- --
Recognized actuarial (gain)/loss............ (7) 1 9 (9) (5) (4)
---- ---- ---- ---- ---- ----
Net period benefit costs.................... $209 $271 $294 $149 $155 $145
==== ==== ==== ==== ==== ====

Total pension expense for all retirement plans (including defined
contribution plans) was $302 million in 2000, $285 million in 1999 and
$304 million in 1998.

B-40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(16) RETIREMENT AND POSTRETIREMENT PLANS (CONTINUED)
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the plans with accumulated benefit obligations in
excess of plan assets were $1.0 billion, $632 million and $61 million,
respectively, as of December 31, 2000 and $500 million and $444 million and
$47 million, respectively, as of December 31, 1999.

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one-percentage-point change in
assumed health care trend rate would have the following effects:

(IN MILLIONS) 1% INCREASE 1% DECREASE
------------- ----------- -----------

Effect on total service and interest cost................. $ 25 $ (20)
Effect on postretirement benefit obligation............... $211 $(177)

Changes in interest rates or rates of inflation may impact the assumptions
used in the valuation of pension obligations and postretirement obligations
including discount rates and rates of increase in compensation, resulting in
increases or decreases in United's pension and postretirement liabilities and
pension and postretirement costs.

(17) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

See Market Risk Disclosures for a discussion of the Company's foreign
currency and fuel price risk management activities, and the fair value of all
significant financial instruments.

CREDIT EXPOSURES OF DERIVATIVES

The Company's theoretical risk in the derivative financial instruments
described in Market Risk Disclosures is the cost of replacing the contracts at
current market rates in the event of default by any of the counterparties.
However, the Company does not anticipate such default as counterparties are
selected based on credit ratings and the relative market positions with each
counterparty are monitored.

FINANCIAL GUARANTEES

Special facility revenue bonds have been issued by certain municipalities to
build or improve airport and maintenance facilities leased by United. Under the
lease agreements, United is required to make rental payments in amounts
sufficient to pay the maturing principal and interest payments on the bonds. At
December 31, 2000, $1.2 billion principal amount of such bonds was outstanding.
As of December 31, 2000, UAL and United had jointly guaranteed $35 million of
such bonds and United had guaranteed $1.2 billion of such bonds, including
accrued interest. The payments required to satisfy these obligations are
included in the future minimum lease payments disclosed in Note 10, "Lease
Obligations."

B-41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(17) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
CONCENTRATIONS OF CREDIT RISK

The Company does not believe it is subject to any significant concentration
of credit risk. Most of the Company's receivables result from sales of tickets
to individuals through geographically dispersed travel agents, company outlets
or other airlines, often through the use of major credit cards. These
receivables are short term, generally being settled shortly after the sale.

(18) COMMITMENTS, CONTINGENT LIABILITIES AND UNCERTAINTIES

The Company has certain contingencies resulting from litigation and claims
(including environmental issues) incident to the ordinary course of business.
Management believes, after considering a number of factors, including (but not
limited to) the views of legal counsel, the nature of contingencies to which the
Company is subject and its prior experience, that the ultimate disposition of
these contingencies is not expected to materially affect UAL's consolidated
financial position or results of operations. UAL records liabilities for legal
and environmental claims against it in accordance with generally accepted
accounting principles. These amounts are recorded based on the Company's
assessments of the likelihood of their eventual settlements. The amounts of
these liabilities could increase or decrease in the near term, based on
revisions to estimates relating to the various claims.

At December 31, 2000, commitments for the purchase of property and
equipment, principally aircraft, approximated $4.7 billion, after deducting
advance payments. An estimated $2.5 billion will be spent in 2001, $1.7 billion
in 2002 and $0.5 in 2003. The major commitments are for the purchase of A319,
A320, B767, and B777 aircraft, which are scheduled to be delivered through 2003.
The above numbers include a recent conversion of 15 option aircraft to firm
orders to be delivered in 2003.

In connection with the construction of the Indianapolis Maintenance Center,
United agreed to spend an aggregate $800 million on capital investments by the
year 2001 and employ at least 7,500 individuals by the year 2004. In the event
such targets are not reached, United may be required to make certain payments to
the city of Indianapolis and state of Indiana.

Approximately 80% of United's employees are represented by various labor
organizations. The labor contracts with the IAM became amendable in July 2000.
The Company is currently in the process of negotiating these contracts. The
contracts with ALPA and the AFA become amendable in 2004 and 2006, respectively.
See OTHER INFORMATION, "Labor Agreements" in MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for details.

(19) SEGMENT INFORMATION

United has a global route network designed to transport passengers and cargo
between destinations in North America, the Pacific, the Atlantic and Latin
America. These regions constitute United's four reportable segments. The
accounting policies for each of these

B-42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(19) SEGMENT INFORMATION (CONTINUED)
segments are the same as those described in Note 1, "Summary of Significant
Accounting Policies," except that segment financial information has been
prepared using a management approach which is consistent with how the Company's
management internally disaggregates financial information for the purpose of
making internal operating decisions. UAL evaluates performance based on United's
earnings before income taxes and gains on sales. Revenues are attributed to each
reportable segment based on the allocation guidelines provided by the U.S.
Department of Transportation, which classifies flights between the U.S. and
foreign designations as part of each respective region. A reconciliation of the
total amounts reported by reportable segments to the applicable amounts in the
financial statements follows:

YEAR ENDED DECEMBER 31, 2000
--------------------------------------------------------------------------------
REPORTABLE
NORTH LATIN SEGMENT CONSOLIDATED
(IN MILLIONS) AMERICA PACIFIC ATLANTIC AMERICA TOTAL OTHER TOTAL
------------- -------- -------- -------- -------- ---------- -------- ------------

Revenue................... $13,094 $3,161 $2,260 $816 $19,331 $21 $19,352
Interest income........... 55 23 16 5 99 2 101
Interest expense.......... 234 95 66 21 416 (14) 402
Equity in losses of
affiliates.............. (5) (2) (1) -- (8) (4) (12)
Depreciation and
amortization............ 630 176 141 43 990 68 1,058
Earnings before income
taxes, investment
impairment and gains on
sales................... 205 60 102 10 377 6 383

YEAR ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
REPORTABLE
NORTH LATIN SEGMENT CONSOLIDATED
(IN MILLIONS) AMERICA PACIFIC ATLANTIC AMERICA TOTAL OTHER TOTAL
------------- -------- -------- -------- -------- ---------- -------- ------------

Revenue................... $12,516 $2,691 $1,973 $787 $17,967 $60 $18,027
Interest income........... 40 14 10 4 68 -- 68
Interest expense.......... 217 79 55 21 372 (10) 362
Equity in earnings of
affiliates.............. 21 9 5 2 37 -- 37
Depreciation and
amortization............ 550 145 115 42 852 15 867
Earnings before income
taxes and gains on
sales................... 889 81 164 20 1,154 57 1,211

B-43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(19) SEGMENT INFORMATION (CONTINUED)

YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------
REPORTABLE
NORTH LATIN SEGMENT CONSOLIDATED
(IN MILLIONS) AMERICA PACIFIC ATLANTIC AMERICA TOTAL OTHER TOTAL
------------- -------- -------- -------- -------- ---------- -------- ------------

Revenue................... $11,997 $2,843 $1,846 $832 $17,518 $43 $17,561
Interest income........... 33 14 8 3 58 1 59
Interest expense.......... 207 84 49 22 362 (7) 355
Equity in earnings of
affiliates.............. 41 17 10 4 72 -- 72
Depreciation and
amortization............ 520 145 95 45 805 (12) 793
Earnings (loss) before
income taxes............ 1,118 (105) 185 22 1,220 36 1,256

(IN MILLIONS) 2000 1999 1998
------------- -------- -------- --------

Total earnings for reportable segments...................... $377 $1,154 $1,220
Gains on sales............................................ 109 731 --
Investment impairment..................................... (61) -- --
UAL subsidiary earnings................................... 6 57 36
---- ------ ------
Total earnings before income taxes, distributions on
preferred securities, extraordinary item and cumulative
effect.................................................... $431 $1,942 $1,256
==== ====== ======

UAL's operations involve an insignificant level of dedicated revenue
producing assets by reportable segment. The overwhelming majority of UAL's
revenue producing assets can be deployed in any of the four reportable segments.
UAL has significant intangible assets related to the acquisition of its Atlantic
and Latin America route authorities.

(20) STATEMENT OF CONSOLIDATED CASH FLOWS -- SUPPLEMENTAL DISCLOSURES

Supplemental disclosures of cash flow information and non-cash investing and
financing activities were as follows:

(IN MILLIONS) 2000 1999 1998
------------- -------- -------- --------

Cash paid during the year for:
Interest (net of amounts capitalized)..................... $298 $260 $234
Income taxes.............................................. 23 296 160

Non-cash transactions:
Capital lease obligations incurred........................ 339 482 701
Long-term debt incurred in connection with additions to
equipment............................................... 32 -- --
Increase (decrease) in pension intangible assets.......... 107 (123) (15)
Net unrealized gain (loss) on investment in affiliates.... (196) 354 --

B-44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(21) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

1ST 2ND 3RD 4TH
(IN MILLIONS, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER YEAR
------------------------------------ -------- -------- -------- -------- --------

2000:
Operating revenues.................... $4,546 $5,109 $4,905 $4,792 $19,352
Earnings (loss) from operations....... 252 605 (41) (162) 654
Earnings (loss) before extraordinary
item and cumulative effect.......... 110 336 (110) (71) 265
Extraordinary loss on early
extinguishment of debt, net......... -- -- (6) -- (6)
Cumulative effect of accounting
change, net......................... (209) -- -- -- (209)
Net earnings (loss)................... $ (99) $ 336 $ (116) $ (71) $ 50
Per share amounts, basic:
Earnings before extraordinary item
and cumulative effect............. $ 1.42 $ 6.61 $(2.17) $(1.40) $ 4.29
Extraordinary loss on early
extinguishment of debt, net....... -- -- (0.13) -- (0.13)
Cumulative effect of accounting
change, net....................... (4.14) -- -- -- (4.08)
Net earnings........................ $(2.72) $ 6.61 $(2.30) $(1.40) $ 0.08
Net earnings per share, diluted....... $(1.18) $ 2.86 $(2.30) $(1.40) $ 0.04

1999:
Operating revenues.................... $4,160 $4,541 $4,845 $4,481 $18,027
Earnings from operations.............. 146 433 619 193 1,391
Earnings before extraordinary item.... 78 672 359 129 1,238
Extraordinary loss on early
extinguishment of debt, net......... -- (3) -- -- (3)
Net earnings.......................... $ 78 $ 669 $ 359 $ 129 $ 1,235
Per share amounts, basic:
Earnings before extraordinary
item.............................. $ 0.91 $12.26 $ 6.18 $ 1.85 $ 21.26
Extraordinary loss on early
extinguishment of debt, net....... -- (0.05) -- -- (0.06)
Net earnings........................ $ 0.91 $12.21 $ 6.18 $ 1.85 $ 21.20
Net earnings per share, diluted....... $ 0.44 $ 5.78 $ 2.89 $ 0.84 $ 9.94

The sum of quarterly earnings per share amounts is not the same as annual
earnings per share amounts because of changing numbers of shares outstanding.

During the third quarter of 2000, UAL recorded an investment impairment of
$61 million related to its warrants in Priceline.com. Additionally, in the
fourth quarter 2000, UAL recognized a pre-tax gain of $109 million on the sale
of its investment in GetThere.com. (See Note 6 "Investments".)

During the second quarter of 1999, UAL recognized a pre-tax gain of
$669 million on the sale of a portion of its investment in Galileo.
Additionally, in the fourth quarter 1999, UAL recognized a pre-tax gain of
$62 million on the sale of a portion of its investment in Equant. (See Note 6
"Investments".)

B-45

UAL CORPORATION

THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF UAL CORPORATION

P
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement, hereby appoints James E. Goodwin, James J. O'Connor and Paul E.
R Tierney, Jr. and each of them, as proxies with full power of substitution,
for and in the name of the undersigned, to vote all shares of Common Stock
of UAL Corporation owned of record by the undersigned on the matters listed
O in this proxy and, in their discretion, on such other matters as may
properly come before the Annual Meeting of Stockholders to be held at the
Four Seasons Resort - Palm Beach, 2800 S. Ocean Boulevard, Palm Beach, FL
X 33480 on May 17, 2001 at 10:00 a.m. and any adjournments or postponements
thereof, unless otherwise specified herein.

Y This card, the telephonic or internet voting procedures, when properly
completed, also constitutes voting instructions to the respective Trustees
of the Employees' Stock Purchase Plan, 401(k) Plans and International
Employee Stock Ownership Plans of UAL Corporation or United Air Lines, Inc.
to vote, in person or by proxy, all shares of Common Stock of UAL
Corporation allocated to the accounts of the undersigned held by the
Trustees.

You are encouraged to specify your choices by marking the appropriate oval
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY OVALS IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU VOTE BY PHONE, INTERNET OR SIGN AND RETURN THIS
CARD. -----------------
SEE REVERSE
SIDE
-----------------

5621 -- UAL CORPORATION

--------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^

YOU CAN VOTE BY TELEPHONE OR INTERNET!
AVAILABLE 24 HOURS A DAY - 7 DAYS A WEEK

Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy. Have this proxy card in hand when you vote.

TO VOTE BY PHONE (WITHIN THE U.S. AND CANADA ONLY)
- Call toll free 1-888-457-2964 from a touch tone telephone. There is NO
CHARGE for this call.
- Enter the six-digit Control Number located below your name and address.
OPTION 1: If you choose to vote as the Board of Directors recommends on
ALL proposals, press 1. When asked, please confirm your vote by
pressing 1 again.
OPTION 2: If you choose to vote on EACH proposal SEPARATELY, press 0 and
follow the recorded instructions. Your vote selections will be
repeated and you will have an opportunity to confirm them.

TO VOTE ON THE INTERNET
- Go to the following website: WWW.COMPUTERSHARE.COM/US/PROXY
- Enter the information requested on your computer screen, including your
six-digit Control Number located below your name and address, then follow
the voting instructions on the screen.

IF YOU VOTE BY TELEPHONE OR THE INTERNET, DO NOT MAIL BACK
THIS PROXY CARD. PROXIES SUBMITTED BY TELEPHONE OR THE INTERNET
MUST BE RECEIVED BY 12:00 MIDNIGHT,
CENTRAL DAYLIGHT TIME, ON MAY 15, 2001.
THANK YOU FOR VOTING!

UAL CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.

[ ]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND AGAINST
PROPOSALS 3 AND 4. IF THIS CARD CONSTITUTES VOTING INSTRUCTIONS TO A PLAN
TRUSTEE, THE TRUSTEE WILL VOTE AS DESCRIBED IN THE PLAN DOCUMENTS AND ANY
ACCOMPANYING MATERIALS. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2 AND AGAINST
PROPOSALS 3 AND 4.

FOR AGAINST ABSTAIN
1. ELECTION OF FIVE PUBLIC DIRECTOR NOMINEES: FOR WITHHOLD FOR ALL 2. RATIFICATION OF THE APPOINTMENT
01-Rono J. Dutta, 02-W. James Farrell, ALL ALL EXCEPT OF ARTHUR ANDERSEN LLP AS
03-James E. Goodwin, 04-James J. O'Connor, INDEPENDENT ACCOUNTANTS.
05-Paul E. Tierney, Jr.

FOR AGAINST ABSTAIN
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING 3. PROPOSAL CONCERNING
NOMINEE(S):_________________________________ COMPENSATION OF DIRECTORS.

FOR AGAINST ABSTAIN
4. PROPOSAL CONCERNING CERTAIN
BUSINESS COMBINATIONS.

CONTROL NUMBER
DATED: , 2001
------------------------

SIGNATURE(S)
---------------------------------------------
Please sign exactly as your name appears
on this proxy. For joint accounts, each
owner should sign. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full title.
You revoke all proxies heretofore given to
vote at the Annual Meeting or any
adjournments or postponements.

TO VOTE BY PHONE OR INTERNET SEE REVERSE SIDE FOR INSTRUCTIONS

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^ FOLD AND DETACH HERE ^

ADMISSION TICKET MEETING OF STOCKHOLDERS
OF UAL CORPORATION
MAY 17, 2001
10:00 A.M.
[UNITED AIRLINES THE FLAGLER BALLROOM, CONFERENCE LEVEL 2
LOGO] FOUR SEASONS RESORT - PALM BEACH
2800 S. OCEAN BOULEVARD
PALM BEACH, FL 33480

_______________________________________
5621--UAL CORPORATION You must present this ticket to the UAL
representative at the entrance to the
Flagler Ballroom to be admitted to the
Annual Meeting.