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Dear Fellow United Employee:

This is the first of a series of letters to keep you abreastof what's happening at United and our evolving financial situation. I also am continuing my weekly voicemails to all supervisors and managers;they can help answer your questions.  I also urge you to take advantageof the daily NewsReal and SkyNet to gather as much information aspossible.

Prior to September 11, all of the major U.S. airlineswere having financial difficulties as a result of the weakening economy. The economic pain was worse for us because we rely more heavily on frequentbusiness travelers for our business than they do.  But, while thingswere difficult, we were putting in place the cornerstones of a strategicplan to improve our revenue and profitability.

Then came September 11^th.

In the wake of that day's horrific events, we are in nothingless than a fight for our life.  Never in our 75-year history havewe faced an economic challenge of this magnitude, where the drop-off inair travel has been so unexpected and prolonged.

Our number one priority now is to get United into a financialposition that will allow us to continue operating.  We are not thereyet.  To get there, we must focus on breakeven cash flow.  Thatmeans being in the position where we have as much money coming into ourbank account as we have streaming out of it.  In the past, we struggledto make a profit.  Now we're in a struggle just to survive.

So getting ourselves back to a breakeven cash flow - whateverit takes - is job one for the foreseeable future.  Because if we don'tsucceed we'll eventually run out of money - it's that simple and that painful.

Let me illustrate the financial hole we're in.  BeforeSeptember 11^th, we were not in a comfortable financial state,with costs exceeding our revenue on a daily basis.  Today, the situationis exacerbated with costs exceeding revenues at four times the pre-September11 rate.  Today, we are literally hemorrhaging money.

Clearly, this bleeding has to be stopped - and soon -or United will perish sometime next year.  We need to get this lossrate down to zero, or breakeven.  That will give us the breather weneed to regain our bearings and start crawling back to profitability andbegin to rebuild our balance sheet.

While we do have a cushion from borrowing, government-guaranteedloans and other sources available to us, this leaves absolutely no roomfor complacency.  Pan Am and Eastern went too far down that trailand never returned.  They borrowed to meet expenses - then borrowedsome more against assets to pay off the initial loans - and then were forcedto sell their assets to cover the second loans.  In short, they borrowedtheir tomorrows to live just another few days.
 
 

October 18, 2001

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We don't want to follow in those footsteps because werecognize that loans are merely crutches, not cures.  I want to makeit clear: Our top priority now must be to reduce costs and increase revenueto the point where what we spend (in all areas, including payroll and operations)equals what we take in (from sales of passenger tickets, cargo and othersources).

We've already done much to cut costs.  We've immediatelyreduced our flying schedule by 20 to 25 percent; shut down non-aircraftcapital projects (including JFK Terminal 6 and Dulles Tier 2); reducedsupplier and discretionary spending, and - most difficult of all - decidedto furlough 20,000 United employees.

I wish I could report that work in this area is completed. It isn't.  We are continuing to look at all aspects of our business- from payroll and operations to examining the costs under our labor contracts. Nothing is sacred or off-limits.

We also are working hard to generate revenue.  Thefirst step is to get people comfortable about flying again.  We andthe rest of the industry - along with the U.S. President, other electedofficials and government agencies - are doing everything we can.

To get passengers back on our planes, we also need toconvince them that airline travel is safe.  We are joining with therest of the industry and the government to implement a number of measures,including reinforced cockpit doors and placing responsibility for securityunder federal jurisdiction.  We're also issuing special fares, MileagePlus^® offers and new ads that will feature United employeesencouraging our customers to return to the skies.

However, much of our success in generating revenue willdepend upon you. Once we bring customers back to our ticket counters, gateareas and airplane cabins, it will be up to you to make them comfortableand provide them with the service they've come to expect from United.

I'm very proud of the work you're doing.  In thewake of the September 11^th tragedies, I've seen a renewed spiritat United. People are giving more of themselves to this company than I'veever witnessed in the 35 years I've been here.  This is the true fabricof United.

Thank you for your loyalty, for your hard work and foryour service on behalf of our customers in these, the most difficult oftimes.  Let's keep it up.  The sooner we get to breakeven, thesooner we'll remove the doubts about our future.