March 21, 2006 – Sharpening United's Competitive Edge in the Critical China Market

Hi, it's Glenn, it's the 21st of March, and I'm calling today from Shanghai, China, where we have just announced a new code-share agreement with Shanghai Airlines.  Today's announcement caps a busy few days here and in Beijing – both vital gateways in today's international travel market and keys to our strength in the Pacific region.

Our service to the Asia-Pacific – and to China in particular – is an important component of our success.  We have been building our brand and operations here for 20 years, earning widespread customer recognition.  We hold strong positions in the market in destinations served and absolute number of flights – and the region now accounts for about 25 percent of our capacity.

We are continuing to work hard to build on what we’ve already accomplished.  With China among the world's fastest growing economies – and with 25 individual cities in the People’s Republic as big as or bigger than Chicago or Los Angeles – new opportunities are opening up here for United.  But we expect fierce competition, with new entrants coming into the market.

As the national economy of China is growing exponentially – along with investment from all over the world – the demand for airline travel here is booming as well.  In 2005 alone, Chinese carriers had commitments for 590 new aircraft.

In addition, membership in the World Trade Organization and preparations for the 2008 Olympic Games in Beijing promise accelerated growth in passenger and cargo traffic for the next five years.

With bilateral talks on passenger air service to begin between the U.S. and China in April, we met with key Chinese government officials in Beijing.  In these conversations, we expressed our hope that these talks will lead to new opportunities for United to begin additional service from our hubs to Beijing, Shanghai and Guangzhou.

In Beijing and Shanghai this week, our team met with groups of important current and prospective customers to reinforce our commitment to excellent service and to continuing to support their needs for reliable, convenient air travel to the U.S. and across the globe.

In addition, we visited with Chairman Li of Air China to review the progress we've made in expanding our code-share agreement and to discuss the next steps in deepening our cooperation.

As I mentioned earlier, we announced at a press conference in Shanghai, United's important new code-share agreement with Shanghai Airlines.  This agreement makes excellent business sense for both of our companies and for customers and communities on both sides of the Pacific.

The agreement provides United's customers with access to four new major cities in China, as well as convenient connections at Pudong International Airport and frequent-flyer rewards for travel within China.

Now, Shanghai Airlines' customers get easy access to United's daily nonstop flights from Shanghai to Chicago and San Francisco, and to hundreds of other destinations in the U.S. and worldwide.

Shanghai Airlines has a young fleet, and sound plans to add aircraft and expand their route network in China.  And they have been designated by their government as the next carrier from the People's Republic to fly to the U.S. as an international carrier.  In short, this is exactly the kind of partner that we need to work to expand our presence in the region, grow our network and meet the demands of our customers more completely.

Sidney Kwok, our country manager in China, has joined me on the call today to share some thoughts about the changes that he has seen in the Chinese aviation market over the last few years. So Sidney, I'll turn the call over to you.

Sidney Kwok:

Thank you, Glenn.

In China, we have seen significant growth in both the travel patterns and the infrastructure to support travel in and out of China over the last several years.

The World Trade Organization reports there were 31 million outbound travelers in the year 2005, growing to a predicted 100 million in the year 2020.

Glenn mentioned the strength of China’s economy.  For United, that means there is a growing market of Chinese consumers with high disposable income, who are seeking travel opportunities overseas.  Chinese travelers are becoming more discerning, seeking more product offerings targeted at their specific travel needs.

With four daily nonstop services to China, United has made a significant investment in meeting China’s travel needs. We know there is more to do, and we are working on multiple levels to increase frequencies and increase reach through our alliance partners. We are also working to make our product even more appealing to our Chinese customers.

Today’s agreement is a significant milestone in advancing our efforts to serve the burgeoning Chinese market.

We look forward to continuing to play a strong role in supporting aviation growth in China.

Thank you, Glenn.  Back to you.

Glenn Tilton:

Thank you, Sidney.  And thanks to your team for all of their accomplishments.  As we celebrate the 20th anniversary of our relationship with China, we approach opportunities here from a position of significant strength.  But we do not take these opportunities for granted.  We are – and will continue to be – a vigorous global competitor.

We are continuing to improve and invest in the products that are most critical for our business customers.  To this point, we announced last week that we are investing $165 million in new seating for our international premium cabins, which are so important for our customers here and throughout Asia.  We are also continuing to strengthen our relationships with our partners in the region and exploring options to expand our reach with new routes and new agreements. 

These are the right priorities for United – and this approach allows us to make a very strong and successful presence in China even more compelling as the market continues to grow and to open.

That's all for now.  I will be talking to you again soon.  Until then, stay focused on our customers, on one another and stay United.