United Airlines (UAUA)

Municipal Bond Obligations.   The Company is a party to numerous long-term agreements to lease certain airport and maintenance facilities that are financed through tax-exempt municipal bonds that are issued by various local municipalities to build or improve airport and maintenance facilities. As a result of the Company’s bankruptcy filing, United was not permitted to make payments on unsecured pre-petition debt. The Company had been advised that these municipal bonds may be unsecured (or in certain instances, partially secured) pre-petition debt. Therefore, through the bankruptcy process, the Company had either settled or rejected certain pre-petition debt associated with the municipal bonds. Certain of the Company’s municipal bond obligations relating to John F. Kennedy International Airport (“JFK”), Los Angeles International Airport (“LAX”), and San Francisco International Airport (“SFO”) have been conclusively adjudicated as financings and not true leases, while the bonds relating to Denver International Airport (“DEN”) have been conclusively adjudicated as a true lease. There remains pending litigation to

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determine the value of the security interests, if any, that the bondholders at LAX and SFO have in the underlying UAL leaseholds.

Pension Benefit Terminations.   In June 2006, the United States District Court for the Northern District of Illinois (“District Court”) entered an order approving the termination of the United Airlines Pilot Defined Benefit Pension Plan (“Pilot Plan”). Air Line Pilots Association (“ALPA”) and United Retired Pilots Benefit Protection Association (“URPBPA”) filed an appeal with the United States Court of Appeals for the Seventh Circuit (“Court of Appeals”). In July 2006, the Court of Appeals granted United’s motion to consolidate this appeal with URPBPA’s Plan of Reorganization Confirmation Order appeal, discussed below. Briefing on both appeals was completed in August 2006 and oral argument occurred in September 2006. On October 25, 2006, the Court of Appeals affirmed the District Court’s order approving the termination of the Pilot Plan effective December 30, 2004. The parties may seek rehearing or petition the United States Supreme Court (“Supreme Court”) for a writ of certiorari on or before November 9, 2006 (December 9, 2006 for PBGC) or January 23, 2007, respectively. If the termination order is ultimately reversed on appeal and it results in the reversal of the termination of one or more defined benefit pension plans, it could have a materially adverse effect on our results of operation and financial condition.

There is also a dispute with respect to the continuing obligation of United to pay non-qualified pension benefits to retired pilots pending settlement of the involuntary termination proceeding. On October 6, 2005, the Bankruptcy Court ruled that the Company was obligated to make payment of all non-qualified pension benefits for October 2005. Subsequently, during the first quarter of 2006, the District Court dismissed the Company’s appeal of the Bankruptcy Court’s October 6, 2005 order in light of its earlier decision reversing the Bankruptcy Court’s termination order. On October 25, 2006, the Court of Appeals reversed the District Court’s order dismissing for lack of ripeness the Company’s appeal of the Bankruptcy Court’s October 6, 2005 order and remanded the case with instructions to reverse the Bankruptcy Court’s order compelling payment of non-qualified benefits for October 2005 or later months. The parties may seek rehearing or petition the Supreme Court for a writ of certiorari on or before November 9, 2006 (December 9, 2006 for PBGC) or January 23, 2007, respectively. On November 6, 2006, ALPA filed a petition for rehearing on the Court of Appeals reversal of the October 6, 2005 order.

In March 2006, the Bankruptcy Court ruled that the Company was obligated to make payment of all non-qualified pension benefits for the months of November and December 2005 and January 2006. The Bankruptcy Court also ruled that the Company’s obligation to pay non-qualified pension benefits ceased as of January 31, 2006. The Company filed a notice of appeal of the Bankruptcy Court’s ruling to the District Court. URPBPA and ALPA also filed notices of appeal with respect to the Bankruptcy Court’s order, which were subsequently consolidated with the Company’s appeal. United agreed with URPBPA and ALPA to pay the disputed non-qualified pension benefits for the months of November and December 2005 and January 2006, an aggregate amount totaling approximately $17 million, into an escrow account. The District Court affirmed the Bankruptcy Court’s ruling in September 2006. The Company filed a notice of appeal of the District Court’s ruling to the Court of Appeals. URPBPA and ALPA also appealed the District Court’s decision. The Company subsequently filed a motion to consolidate its appeal from the Bankruptcy Court’s October 2005 non-qualified benefits order with the three appeals from the Bankruptcy Court’s March 2006 non-qualified benefits order. The Court of Appeals denied the Company’s motion, but issued an order staying briefing on the March 2006 non-qualified benefits order until further order of the Court of Appeals. In light of the Court of Appeals’ October 25, 2006 decision described above, the Company is reasonably optimistic of a successful outcome of its appeal in this matter, although there can be no assurances that the ultimate outcome of this appeal will be favorable to the Company.

Objection to the Plan of Reorganization Confirmation.   URPBPA filed a notice of appeal to the Court of Appeals challenging the District Court’s approval of the Bankruptcy Court’s Plan of Reorganization confirmation order. In February 2006, United filed a motion to dismiss the appeal based on the substantial

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consummation of the Plan of Reorganization. In June 2006, the District Court dismissed URPBPA’s appeal. Subsequently, URPBPA filed a notice of appeal of the decision to the Court of Appeals. In July 2006, the Court of Appeals granted United’s motion to consolidate URPBPA’s appeal with URPBPA and ALPA’s Pilot Plan termination appeal. Briefing on both appeals was completed in August 2006 and the Court of Appeals heard oral argument in September 2006, with respect to the termination appeal. On October 25, 2006, the Court of Appeals reversed the District Court’s order dismissing for lack of ripeness URPBPA’s appeal of the confirmation order and remanded the case to the District Court with instructions to affirm the confirmation order. The parties may seek rehearing or petition the Supreme Court for a writ of certiorari on or before November 9, 2006 (December 9, 2006 for PBGC) or January 23, 2007, respectively. If the confirmation order was ultimately reversed on appeal, it could have a materially adverse effect on the Company’s financial performance.

Legal and Environmental.   UAL 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 we are subject and prior experience, that the ultimate disposition of these contingencies will not materially affect the Company’s consolidated financial position or results of operations. When appropriate the Company accrues for these matters based on its assessments of the likelihood of their eventual disposition. The amounts of these liabilities could increase or decrease in the near term, based on revisions to estimates relating to the various claims.

The Company anticipates that if ultimately found liable, its damages from claims arising from the events of September 11, 2001, could be significant; however, the Company believes that, under the Air Transportation Safety and System Stabilization Act of 2001, its liability will be limited to its insurance coverage. We have not incurred any material environmental obligations relating to the events of September 11, 2001.

Municipal Bond Obligations.   The Company is a party to numerous long-term agreements to lease certain airport and maintenance facilities that are financed through tax-exempt municipal bonds that are issued by various local municipalities to build or improve airport and maintenance facilities. As a result of the Company’s bankruptcy filing, we were not permitted to make payments on unsecured pre-petition debt. The Company had been advised that these municipal bonds may be unsecured (or in certain instances, partially secured) pre-petition debt. Therefore, through the bankruptcy process, the Company had either settled or rejected certain pre-petition debt associated with the municipal bonds. The ultimate disposition of a portion of the outstanding municipal bond obligations remains subject to the uncertain outcome of pending litigation. Even if a portion of the obligations are determined to be financings and not true leases, there is likely to remain an issue regarding the extent to which those financings would be considered secured by an interest in the value of the underlying leasehold, if any.

Pension Terminations.   In June 2006, the United States District Court for the Northern District of Illinois (“District Court”) entered an order approving the termination of the United Airlines Pilot Defined Benefit Pension Plan (“Pilot Plan”). Air Line Pilots Association (“ALPA”) and United Retired Pilots

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Benefit Protection Association (“URPBPA”) filed an appeal with the United States Court of Appeals for the Seventh Circuit (“Court of Appeals”). In July 2006, the Court of Appeals granted United’s motion to consolidate this appeal with URPBPA’s confirmation order appeal. Briefing on both appeals will be completed in August 2006 and oral argument is scheduled to occur on September 26, 2006 with respect to the termination appeal (though oral arguments have not yet been scheduled with respect to the confirmation appeal). If the termination order was ultimately reversed on appeal, it could have a materially adverse effect on the Company’s financial performance, should such determination result in the reversal of the termination of one or more defined benefit pension plans.

There is also a dispute with respect to the continuing obligation of United to pay non-qualified pension benefits to retired pilots pending settlement of the involuntary termination proceeding. The Bankruptcy Court had previously required the Company to continue paying these benefits until entry of the Bankruptcy Court’s order terminating the Pilot Plan. This was appealed by the Company and the funds necessary to pay non-qualified benefits for the month of October were placed in a segregated account. During the first quarter of 2006, the District Court dismissed the Company’s appeal. The Company filed a notice of appeal of the District Court’s ruling to the Court of Appeals. In accordance with the Court of Appeal’s rules, the Court of Appeals scheduled briefing to conclude by August 2006. The Court of Appeals has not yet scheduled oral argument.

In addition, in March 2006, the Bankruptcy Court ruled that the Company was obligated to make payment of all non-qualified pension benefits through January 31, 2006. The Company has appealed this ruling to the District Court. Briefing on this matter was completed in July 2006 and a status conference is scheduled for September 2006.

Objection to the Plan of Reorganization Confirmation.   URPBPA filed a notice of appeal to the Court of Appeals challenging the District Court’s approval of the Bankruptcy Court’s Plan of Reorganization confirmation order. In February of 2006, United filed a motion to dismiss the appeal based on the substantial consummation of the Plan of Reorganization. In June 2006, the District Court dismissed URPBPA’s appeal. Subsequently, URPBPA filed a notice of appeal of the decision to the Court of Appeals. In July 2006, the Court of Appeals granted United’s motion to consolidate URPBPA’s appeal with URPBPA and ALPA’s Pilot Plan termination appeal. Briefing on both appeals will be completed in August 2006. The Court of Appeals has set oral argument to occur on September 26, 2006 with respect to the termination appeal (though oral arguments have not yet been scheduled with respect to the confirmation appeal). If the confirmation order was ultimately reversed on appeal, it could have a materially adverse effect on the Company’s financial performance.

Legal and Environmental.   UAL 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 we are subject and prior experience, that the ultimate disposition of these contingencies will not materially affect the Company’s consolidated financial position or results of operations.

We record liabilities for legal and environmental claims against us in accordance with GAAP. These amounts are recorded based on our assessments of the likelihood of their eventual disposition. The amounts of these liabilities could increase or decrease in the near term, based on revisions to estimates relating to the various claims.

The Company anticipates that if ultimately found liable, its damages from claims arising from the events of September 11, 2001 could be significant; however, we believe that, under the Air Transportation Safety and System Stabilization Act of 2001, our liability will be limited to our insurance coverage.

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We have not incurred any material environmental obligations relating to the events of September 11, 2001.