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UAL Corporation's Third-Quarter Fully Distributed Earnings Per Share Set Company Record

SOURCE: UAL Corporation

* The company produced record earnings per share of $4.02 on a fully distributed basis, up 7 percent year-over-year, helped in part by the pilot strike at Northwest. * The U.S. remains the strongest region. Pacific financial performance continues to be adversely affected by the slow Asian economies and unfavorable foreign-exchange rates.

CHICAGO, Oct. 21 /PRNewswire/ --
UAL Corporation (NYSE: UAL), the holding company whose primary subsidiary is United Airlines, today reported record third-quarter net earnings. The record net earnings are based on the exclusion of one-time gains of $378 million ($235 million after tax) from the Apollo Travel Services/Galileo International (ATS/Galileo) transactions in the third quarter of last year.

In accordance with Generally Accepted Accounting Principles (GAAP), 1998 third-quarter net earnings of $425 million ($3.71 per share) broke the record set last year, with operating earnings also setting a record at $695 million. In comparison, third-quarter 1997 net earnings were $344 million ($3.26 per share), excluding ATS/Galileo transactions, on operating earnings of $563 million. Including the one-time gains from ATS/Galileo, net earnings in 1997 were $579 million ($5.61 per share).

Fully Distributed Results

On a pro forma, fully distributed basis (see below for further explanation of the methodology), net earnings set a record at $516 million, up 3 percent from third-quarter 1997 fully distributed net earnings of $499 million, excluding ATS/Galileo. Fully distributed operating earnings for the quarter also set a record, rising 6 percent to $868 million versus $819 million in 1997. Fully distributed earnings per share were $4.02, a 7 percent increase over third quarter 1997 earnings per share of $3.75, excluding ATS/Galileo.

Chairman's Comments

``We are especially pleased with United's third-quarter performance,'' said Gerald Greenwald, chairman and chief executive officer of UAL Corporation. ``Once again, we produced record net earnings, and this was despite the challenging international conditions that have been affecting our performance this year.

``These underlying trends remain predominantly unchanged -- not only the weakened Asian economies and the increased industry capacity in the Latin American and transatlantic markets, but also, on the positive side, the relatively strong demand for travel in the United States. We are keeping a close eye on the economic indicators, and if necessary, stand ready to modify our plans accordingly.

``During the quarter, because of the efforts and dedication of United's employees, we not only met the traffic demands of our busiest season, but we also continued to control costs and were able to provide service to many of the travelers affected by the Northwest strike. I'd like to thank our United employees for admirably rising to the occasion.''

Operating Revenues

Operating revenues for the quarter increased 3 percent over 1997, from $4.64 billion to $4.78 billion. Available seat miles increased 4 percent. Total revenue per available seat mile (unit revenue) decreased very slightly to 10.39 cents compared to 10.43 cents a year ago. Yield (passenger revenue per passenger mile) decreased almost 2 percent to 12.10 cents from 12.33 cents a year ago. Passenger load factor increased to 76.1 percent from 75.3 percent in the previous year.

Passenger revenue rose 3 percent to $4.26 billion from $4.15 billion in third quarter 1997, and cargo revenue increased 1 percent to $228 million versus $225 million in 1997.

Other revenue rose 9 percent to $292 million vs. $268 million a year ago.

Operating Expenses

Fully distributed operating expenses increased 2 percent to $3.91 billion compared to third quarter 1997's $3.82 billion. However, fully distributed operating expenses per available seat mile (unit cost) fell 1 percent from 8.62 cents a year ago to 8.52 cents.

The average price per gallon of jet fuel decreased 10 percent year over year. Excluding fuel cost, fully distributed unit cost increased by 0.5 percent.

Balance Sheet

As of September 30, 3.6 million shares of UAL common stock had been repurchased at a total cost of $247 million, at an average price of $68.25 per share. This repurchase was part of the company's plan to buy back up to $500 million of its outstanding common stock, announced on September 8. Since the end of the quarter, the company has continued to repurchase shares and, as of today, has repurchased a total of 5.6 million shares for a total cost of $367 million, at an average price of $66.06 per share.

n.b.: While UAL Corporation reports its earnings under GAAP -- Generally Accepted Accounting Principles -- a more complete understanding of UAL Corporation's performance may be gained by viewing the results on a pro forma, fully distributed basis. This presentation considers all ESOP shares that will be issued to employees over the course of the ESOP period to be immediately outstanding, thus ``fully distributed.'' Consistent with this presentation, the ``ESOP compensation expense'' -- which reflects the commitment of stock to employees -- is excluded from fully distributed expenses and ESOP convertible preferred stock dividends are not deducted from earnings attributable to common stockholders. No adjustments are made to fully distributed earnings to reflect future salary increases.

                   UAL CORPORATION AND SUBSIDIARY COMPANIES
                       EARNINGS AND EARNINGS PER SHARE
                       (In Millions, Except Per Share)

                                          Three Months Ended
                             September 30, 1998           September 30, 1997
                              GAAP      "Fully             GAAP     "Fully
                           Basis      Distributed"(A)    Basis Distributed"(A)
    EARNINGS
    Operating revenues       $ 4,783     $ 4,783         $ 4,640    $ 4,640
    Operating expenses
     (excluding ESOP
     compensaton expense)     (3,915)     (3,915)         (3,821)    (3,821)
    ESOP compensation
     expense                    (173)        N/A            (256)       N/A

    Operating earnings           695         868             563        819
    Gain on sale of Apollo
     Travel Services              --          --             275        275
    Gain on sale of
     subsidiary's stock           --          --             103        103
    Non-operating expense        (47)        (47)            (28)       (28)

    Earnings before income taxes
     and distributions on
     preferred securities        648         821             913      1,169
    Provision for income
     taxes                       222         304             333        434

    Earnings before distributions
     on preferred securities     426         517             580        735
    Distributions on
     preferred securities, net    (1)         (1)             (1)        (1)

    Net earnings                 425         516             579        734

    Preferred stock
     dividends and other         (25)         (2)            (19)        (3)
    Earnings attributable
     to common shareholders    $ 400       $ 514           $ 560      $ 731

    SHARES
    Average common shares
      assumed outstanding       57.9        57.9            59.6       59.6
    ESOP preferred shares
      assumed outstanding       48.4        68.4            37.3       69.7
    Other                        1.5         1.5             2.9        2.9
    Total shares assumed
     outstanding               107.8       127.8            99.8      132.2

    PER SHARE, DILUTED:
    Earnings before gain
    on sales                  $ 3.71      $ 4.02          $ 3.26      $3.75
    Gains on sales, net
                                  --          --            2.35       1.78
    Net earnings              $ 3.71      $ 4.02          $ 5.61     $ 5.53

    (A)  "Fully distributed" earnings and earnings per share are pro
         forma presentations which consider all ESOP shares which will
         ultimately be released to employees by the end of the ESOP period
         to be immediately outstanding.  Therefore the ESOP compensation
         expense has been excluded from fully distributed earnings and
         ESOP convertible preferred stock dividends have not been deducted
         from earnings attributable to common shareholders.  No
         adjustments are made to fully distributed earnings to reflect
         future salary increases.

                   UAL CORPORATION AND SUBSIDIARY COMPANIES
                       EARNINGS AND EARNINGS PER SHARE
                       (In Millions, Except Per Share)

                                        Nine Months Ended
                               September 30, 1998       September 30,1997
                               GAAP      "Fully          GAAP       "Fully
                             Basis    Distributed"(A)   Basis  Distributed"(A)

    EARNINGS
    Operating revenues       $13,280     $13,280         $13,143     $13,143
    Operating expenses
     (excluding ESOP
     compensation expense)   (11,329)    (11,329)        (11,309)    (11,309)
    ESOP compensation
     expense                    (663)        N/A            (666)        N/A

    Operating earnings         1,288       1,951           1,168       1,834

    Gain sale of Apollo
     Travel Services              --          --             275         275
    Gain on sale of
     subsidiary's stock           --          --             103         103
    Non-operating expense       (115)       (115)            (74)        (74)

    Earnings before income
     taxes and distributions
     on preferred securities   1,173       1,836           1,472       2,138
    Provision for income
     taxes                       401         680             542         809

    Earnings before distributions
     on preferred securities     772       1,156             930       1,329
    Distributions on
     preferred securities, net    (4)         (4)             (4)         (4)
    Net earnings                 768       1,152             926       1,325

    Preferred stock
     dividends and other         (77)         (8)            (57)         (8)
    Earnings attributable
    to common shareholders
                                $691      $1,144            $869      $1,317

    SHARES
    Average common shares
     assumed outstanding        57.7        57.7            59.2        59.2
    ESOP preferred shares
     assumed outstanding        45.8        68.9            34.4        70.0
    Other                        1.6         1.6             2.7         2.7
    Total shares assumed
     outstanding               105.1       128.2            96.3       131.9

    PER SHARE, DILUTED:
    Earnings before gains
    on sales                  $ 6.57      $ 8.93          $ 6.58      $ 8.21
    Gains on sales, net           --          --            2.44        1.78
    Net earnings              $ 6.57      $ 8.93           $9.02      $ 9.99

    (A)  "Fully distributed" earnings and earnings per share are pro
    forma presentations which consider all ESOP shares which will
    ultimately be released to employees by the end of the ESOP period
    to be immediately outstanding.  Therefore the ESOP compensation
    expense has been excluded from fully distributed earnings and
    ESOP convertible preferred stock dividends have not been deducted

    from earnings attributable to common shareholders.  No
    adjustments are made to fully distributed earnings to reflect
    future salary increases.

                   UAL CORPORATION AND SUBSIDIARY COMPANIES
              STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
                       (In Millions, Except Per Share)


    (In accordance with GAAP)               Three Months Ended September 30
                                               1998    1997  % Change

     Operating revenues:
      Passenger                               $4,263  $4,147     +2.8
      Cargo                                      228     225     +1.3
      Other operating revenues                   292     268     +9.0

                                               4,783   4,640     +3.1
    Operating expenses:
      Salaries and related costs              1,350    1,264     +6.8
      ESOP compensation expense                 173      256    -32.4
      Aircraft fuel                             470      510     -7.8
      Commissions                               354      409    -13.4
      Purchased services                        384      329    +16.7
      Aircraft rent                             221      235     -6.0
      Landing fees and other rent               221      202     +9.4
      Depreciation and amortization             199      182     +9.3
      Aircraft maintenance                      165      153     +7.8
      Other operating expenses                  551      537     +2.6
                                              4,088    4,077     +0.3

    Earnings from operations                    695      563    +23.4

    Other income (expense):
      Interest expense                          (92)     (73)   +26.0
      Interest capitalized                       26       25     +4.0
      Interest income                            15       13    +15.4
      Equity in earnings of affiliates           19       17    +11.8
      Miscellaneous, net                        (15)     368     N/A
                                                (47)     350
    Earnings before income taxes and
      distributions on preferred securities     648      913    -29.0
    Provision for income taxes                  222      333    -33.3
    Earnings before distributions on
     preferred securities                       426      580    -26.6
    Distributions on preferred
    securities, net of tax                       (1)      (1)
    Net earnings                               $425     $579    -26.6

    Per share, basic:
     Earnings before gains on sales           $6.91    $5.46
     Gains on sales, net                         --     3.93
     Net earnings                             $6.91    $9.39

     Per share, diluted:
       Earnings before gains on sales         $3.71    $3.26
       Gains on sales, net                       --     2.35

     Net earnings                             $3.71    $5.61

    See accompanying notes.

                  UAL CORPORATION AND SUBSIDIARY COMPANIES
             STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
                     (In Millions, Except Per Share)

    (In accordance with GAAP)            Nine Months Ended September 30
                                              1998   1997    % Change
     Operating revenues:
      Passenger                          $11,777     $11,628    +1.3
      Cargo                                  666         634    +5.0
      Other operating revenues               837         881    -5.0
                                          13,280      13,143    +1.0

    Operating expenses:
      Salaries and related costs           3,959       3,732    +6.1
      ESOP compensation expense              663         666    -0.5
      Aircraft fuel                        1,346       1,559   -13.7
      Commissions                          1,000       1,159   -13.7
      Purchased services                   1,098         946   +16.1
      Aircraft rent                          672         707    -5.0
      Landing fees and other rent            651         644    +1.1
      Depreciation and amortization          582         533    +9.2
      Aircraft maintenance                   462         447    +3.4
      Other operating expenses             1,559       1,582    -1.5
                                          11,992      11,975    +0.1

    Earnings from operations               1,288       1,168   +10.3

    Other income (expense):
      Interest expense                      (265)       (213)  +24.4
      Interest capitalized                    82          75    +9.3
      Interest income                         44          36   +22.2
      Equity in earnings of affiliates        62          64    -3.1
      Miscellaneous, net                     (38)        342    N/A
                                            (115)        304
    Earnings before income taxes and
    distributions on
      preferred securities                 1,173       1,472   -20.3
    Provision for income taxes               401         542   -26.0

    Earnings before distributions on
     preferred securities                    772         930   -17.0
    Distributions on preferred
     securities, net of tax                   (4)         (4)

    Net earnings                            $768        $926   -17.1

    Per share, basic:
       Earnings before gains on sales     $11.97      $10.71
       Gains on sales, net                    --        3.97

       Net earnings                       $11.97      $14.68

    Per share, diluted:
       Earnings before gains on sales      $6.57      $ 6.58
       Gains on sales, net                    --        2.44
       Net earnings                        $6.57       $9.02

    See accompanying notes.

    Consolidated Notes

    (A)  UAL Corporation is a holding company whose principal subsidiary is
         United Air Lines, Inc.

    (B)  "ESOP compensation expense" represents the estimated average fair
         value of ESOP convertible preferred stock committed to be released to
         employees for the period, net of amounts used to satisfy dividend
         requirements for previously allocated ESOP convertible preferred
         shares, under Employee Stock Ownership Plans.  The fair value of ESOP
         convertible preferred stock is estimated based on the market value of
         UAL's common stock.  The average market price of UAL's common stock
         was $72 per share during the third quarter of 1998 versus $79 per
         share during the 1997 third quarter.  The average price during the
         nine-month period ending September 30, 1998, was $82 per share versus
         $71 per share for the same nine-month period in 1997.

    (C)  "Miscellaneous, net" consisted of the following:

                            Third Quarter       Nine-month
                                                  Period
                            1998      1997     1998     1997
    Foreign exchange
    losses                 $ (10)   $ (5)    $ (20)   $ (15)
    Minority interests         --     (1)       --      (15)
    Gain on sale of ATS        --     275       --       275
    Gain on sale of
     Galileo stock             --     103       --       103
    Other                      (5)     (4)     (18)       (6)

                           $  (15)  $ 368    $ (38)    $ 342

    (D)  On September 8, 1998 the Board of Directors authorized the
         repurchase of up to $500 million of the Company's common stock.
         As of September 30, 3.6 million shares had been repurchased
         at a total price of $247 million.

    (E)  Per share amounts were calculated after providing for dividends
         on preferred stock, including ESOP convertible preferred stock,
         of $25 million in the 1998 third quarter, $19 million in the
         1997 third quarter, $77 million in the 1998 nine-month period
         ending September 30 and $57 million in the same 1997 nine-month
         period.  Basic per share amounts were based on weighted average
         common shares outstanding.  Diluted per share amounts include
         potential common shares including ESOP shares committed to be
         released.  Average shares used in the computations were as follows:

                                       1998      1997
    (In Millions)
    Third quarter:
    Basic                             57.9       59.6
    Diluted                          107.8       99.8

    Nine-month period:
    Basic                             57.7       59.2
    Diluted                          105.1       96.3

    (F)  In July 1997, United completed the sale of its interest in the
         Apollo Travel Services Partnership ("ATS"), a 77% owned affiliate
         whose accounts were consolidated, to Galileo International, Inc.
         ("Galileo"), previously a 38% owned affiliate accounted for under the
         equity method, for $539 million in cash.  This transaction resulted
         in a pre-tax gain of $275 million in the third quarter, which is
         included in "Miscellaneous, net".

         Galileo raised a portion of the proceeds used to purchase ATS through
         the completion of an initial public offering of 16.8 million shares
         of its common stock.  This transaction resulted in a reduction of
         the Company's ownership in Galileo from 38% to 32%.  In accordance
         with the Company's policy of recognizing gains or losses on the sale
         of a subsidiary's stock based on the difference between the offering
         price and the Company's carrying amount of such stock, United
         recognized a gain of $103 million in the third quarter, also included
         in "Miscellaneous, net".

                   UNITED AIR LINES, INC AND SUBSIDIARY COMPANIES

                                            Three Months Ended September 30
                                            1998      1997     % Change
    FINANCIAL SUMMARY (UNAUDITED)
     (in millions)

    Operating revenues                     $4,772    $4,630       +3.1
    Operating expenses (excluding ESOP
     compensation expense)                  3,912     3,826       +2.2
    ESOP compensation expense                 173       256      -32.4
                                            4,085     4,082       +0.1

    Earnings from operations (in           $  687    $  548      +25.4
     accordance with GAAP)

    OPERATING STATISTICS

    Revenue passengers (in thousands)      23,953    22,651       +5.7

    Revenue passenger miles (in            34,974    33,394       +4.7
     millions)

    Available seat miles (in millions)     45,929    44,375       +3.5

    Passenger load factor (percent)          76.1      75.3       +0.8pt.

    Breakeven passenger load factor          60.7      60.1       +0.6pt.
     excluding ESOP charges (percent)

    Passenger revenue per passenger mile    12.10      12.33      -1.9
    (cents)

    Operating revenue per available
     seat mile (cents)                      10.39      10.43      -0.4

    Operating expenses excluding ESOP        8.52       8.62      -1.2
       charges per available seat mile (cents)

    Average price per gallon of jet fuel     58.5       65.3     -10.4
     (cents)

    Number of aircraft in operating           580        577
     fleet at end of period

    Average full-time equivalent             92.0       88.8      +3.6
     employees (thousands)

        Note:  Revenue and expenses associated with United's dedicated
    freighter operations are included in the calculations of unit revenue and
    unit cost.  However, dedicated freighter operations do not increase
    available seat miles, which is used as the denominator in the calculation
    of unit revenue and unit cost.  The inclusion of these revenues and
    expenses do not have a material effect on unit revenue and unit cost.


                UNITED AIR LINES, INC AND SUBSIDIARY COMPANIES

                                           Nine Months Ended September 30
                                            1998           1997     % Change
    FINANCIAL SUMMARY (UNAUDITED)
         (in millions)

    Operating revenues                   $ 13,248       $ 13,111      +1.0
    Operating expenses (excluding ESOP     11,320         11,304      +0.1
     compensation expense)
    ESOP compensation expense                 663            666      -0.5
                                           11,983         11,970      +0.1

    Earnings from operations (in          $ 1,265        $ 1,141     +10.9
     accordance with GAAP)

    OPERATING STATISTICS

    Revenue passengers (in thousands)      65,220         63,624      +2.5

    Revenue passenger miles                93,861         91,960      +2.1
     (in millions)

    Available seat miles (in millions)    130,125        126,629      +2.8

    Passenger load factor (percent)          72.1           72.6      -0.5pt.

    Breakeven passenger load factor          60.2           61.3      -1.1pt.

     excluding  ESOP charges (percent)
    Passenger revenue per passenger mile    12.45          12.56      -0.9
     (cents)

    Operating revenue per available
     seat mile (cents)                      10.18          10.35      -1.6

    Operating expenses excluding ESOP        8.70           8.93      -2.6
     charges per available seat mile (cents)

    Average price per gallon of jet fuel     59.4           70.1     -15.3
     (cents)

    Number of aircraft in operating           580            577
     fleet end of period

    Average full-time equivalent              90.9          87.8      +3.5
     employees (thousands)

    Note:  Revenue and expenses associated with United's dedicated freighter
    operations are included in the calculations of unit revenue and unit cost.
    However, dedicated freighter operations do not increase available seat
    miles, which is used as the denominator in the calculation of unit revenue
    and unit cost.  The inclusion of these revenues and expenses do not have a
    material effect on unit revenue and unit cost.

SOURCE: UAL Corporation