LETTER AGREEMENT

Exhibit 10.3

Letter 05-01
( Bankruptcy Exit Agreement )

LETTER OF AGREEMENT
by and between
UAL CORP.,
UNITED AIR LINES, INC.
and
THE AIR LINE PILOTS
in the service of
UNITED AIR LINES, INC.
as represented by
THE AIR LINE PILOTS ASSOCIATION, INTERNATIONAL

            THIS LETTER OF AGREEMENT, dated as of January 1, 2005, is made and entered into in accordance with the Railway Labor Act by and between UAL Corp. (hereinafter referred to as "UAL"), UNITED AIR LINES, INC. (hereinafter referred to as the "Company") and the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter referred to as "ALPA" or the "Association").

            WHEREAS UAL, the Company and the Association have reached agreement concerning the revisions to their current collective bargaining agreement (the "2003 Pilot Agreement" and, as revised by this Letter of Agreement, the "Revised 2003 Pilot Agreement") necessary for the Company to emerge from Chapter 11; and

            WHEREAS certain of the revisions shall become effective as of January 1, 2005 (the "Effective Date"), assuming the complete satisfaction of the conditions described in paragraph 15 below prior to January 31, 2005 and others shall become effective on the effective date (the "Exit Date") of a plan of reorganization proposed by UAL (the "Plan of Reorganization"); and

            WHEREAS the Company has represented to the Association that the Company has concluded that UAL cannot attract the exit financing necessary to emerge from Chapter 11 absent the termination of all of the Company's defined benefit plans;

            THEREFORE the parties to this Letter of Agreement hereby agree as follows:

            1.  Contract Extension . The amendable date of the Revised 2003 Pilot Agreement shall be December 31, 2009. Section 22.D of the Revised 2003 Pilot Agreement shall read in its entirety as follows:

 
This Agreement shall continue in full force and effect through and including December 31, 2009 and shall renew itself without change each succeeding January 1 ^st thereafter, unless written notice of intended change is served in accordance with Section 6, Title I, of the Railway Labor Act by either party upon the other at least thirty (30) but not more than two hundred seventy (270) days prior to December 31, 2009 or any year thereafter. The parties shall commence direct negotiations with respect to such notices no later than thirty (30) days following the delivery of such notice. In the event a new tentative collective bargaining agreement has not been concluded by August 1, 2009 (or August 1 ^st of any year thereafter if applicable), and the services of the National Mediation Board (the "Board") have not previously been invoked, the parties shall, no later than August 1, 2009 (or August 1 ^st of any year thereafter if applicable), jointly invoke the services of the Board under Section 5 of the Act.

            2.  Hourly Pay Rates . The rates for hourly pay (the "Hourly Rates") under Section 3-B of the 2003 Pilot Agreement shall be reduced by 11.8% on the Effective Date, and the reduced Hourly Rates shall thereafter be increased by 1.5% on May 1, 2006, by 1.5% on May 1, 2007, by 1.5% on May 1, 2008 and by 1.5% on May 1, 2009 (as provided in the 2003 Pilot Agreement). In addition to the increases contained in the preceding sentence, the Hourly Rates shall be increased by 1% on January 1, 2008. The Hourly Rates under Section 3-B of the Revised 2003 Pilot Agreement are set forth in Exhibit A to this Letter of Agreement.

            3.  Other Contract Changes . Certain other provisions of the 2003 Pilot Agreement shall be revised on the Effective Date as described on Exhibits B-1, B-2 and B-3 to this Letter of Agreement.

            4.  Defined Benefit Pension Plan .

                    a.    In the event the Company seeks judicial approval to terminate the United Airlines Pilot DefinedBenefit
            Pension Plan (the "A Plan") under 29 U.S.C §1341(c) following April 11, 2005, then, on and after May 11,
            2005, (i) the Association shall waive any claim it may have that the termination of the A Plan would violate the
            terms and conditions of the existing collective bargaining agreement between the Company and the Association,
            and (ii) the Association shall not otherwise oppose the Company's efforts to terminate the A Plan under 29 U.S.C
            §1341(c); provided, however, that nothing in this Letter of Agreement shall be construed, deemed or
            characterized by UAL or the Company as any agreement of any form by the Association that the A Plan should
            be terminated;

                    b.    The Company: (i) shall not terminate or agree to terminate the A Plan effective at any time prior to the
            earlier of (A) ten (10 ) days before the Exit Date and (B) the last date that any of the Company's other defined
            benefit pension plans are terminated (the "Pension Termination Date") and (ii) shall oppose any effort by any other
            person or entity to terminate the A Plan effective at any time prior to the Pension Termination Date;

                    c.    The A Plan shall remain in full force and effect unless (i) the bankruptcy court issues an order declaring
            that the Company has met the requirements for plan termination under 29 U.S.C. §1341(c)(2)(B)(ii), and (ii) any
            of the following has occurred: (A) no timely notice of appeal of the order has been filed, (B) the order has been
            affirmed following the exhaustion of all appeals, or (C) the Exit Date has occurred and the Plan of Reorganization
            has become effective without provision for the continuation of any such appeals; and

                    d.    Notwithstanding any termination of A Plan retirement benefits, any and all of the Company's
            indemnification obligations under or applicable to the A Plan shall remain in full force and effect without regard to
            Section 22 of the Revised 2003 Pilot Agreement.

            5.  Pension Contributions . In the event that the A Plan is terminated pursuant to 29 U.S.C §1341 or §1342 following judicial approval of such termination:

                    a.    The Company shall make an additional monthly contribution (the "C Plan Contribution") to the United
            Airlines Pilot Directed Account Plan (the "PDAP") of six percent (6%) of pilot compensation (as measured under
            the PDAP) beginning with the earlier of (i) June 1, 2005 or (ii) the first day of the calendar month following the
            Exit Date (with a pro rated C Plan Contribution for the period between the Exit Date and the first of the month
            following the Exit Date); provided, however, that in the event the Exit Date follows June 1, 2005, C Plan
            Contributions will accrue from June 1, 2005 through the Exit Date and be contributed in a single lump sum
            payment to the PDAP on the Exit Date;

                    b.    Prior to the Exit Date, the Company and the Association shall adopt a mutually-acceptable qualified or
            non-qualified plan arrangement to accept contributions that cannot be allocated to pilot defined contribution
            accounts under Section 415 of the Internal Revenue Code;

                    c.    At any time prior to January 1, 2007, the Association may elect, on an irrevocable basis, to amend the
            Revised 2003 Pilot Agreement, effective January 1, 2008, (i) to increase the C Plan Contribution from six percent
            (6%) to seven percent (7%) of pilot compensation (as measured under the PDAP) and (ii) to reduce the Hourly
            Pay Rates under Section 3-B of the Revised 2003 Pilot Agreement by one percent (1%);

                    d.    The C Plan Contribution shall be in addition to the nine percent (9%) of pilot compensation contributed
            to the PDAP under the 2003 Pilot Agreement; and

                    e.    Following the Exit Date, the Company shall not establish or re-establish any single-employer defined
            benefit plan for any UAL or Company employee group unless the pilot group is provided the option of electing to
            receive a comparable defined benefit plan in lieu of the C Plan Contribution.

            6.  Profit Sharing . The Revised 2003 Pilot Agreement shall provide for the pilot group to participate in the revised profit sharing program described in Exhibit C to this Letter of Agreement.

            7.  Convertible Notes . In the event that the A Plan is terminated pursuant to 29 U.S.C §1341 or §1342 following judicial approval of such termination, the Revised 2003 Pilot Agreement and the Plan of Reorganization shall provide for the issuance of $550 million of UAL convertible notes, as described in Exhibit D to this Letter of Agreement, to a trust or other entity designated by the Association. The terms of the UAL convertible notes described in Exhibit D shall be subject to mutually-acceptable modifications to optimize implementation for all parties from an accounting, securities law and tax law perspective.

            8.  Distribution Agreement . The Plan of Reorganization shall provide the pilot group with a distribution of UAL equity securities as provided in the amended distribution agreement described in Exhibit E to this Letter of Agreement.

            9.  Additional Non-Labor Savings . Prior to the Exit Date, the Association and the Company shall develop, and the Company shall begin pursuit of, a mutually-acceptable business improvement program reasonably projected to produce at least $150 million of annual savings in non-labor costs in addition to the savings contained in the Gershwin 5F business plan dated as of November 4, 2004 (the "Business Plan").

           10.  Administrative Claim . The Association shall accrue and be entitled to a stipulated, approved and allowed claim of administration under 11 U.S.C §503(b) in the amount of the actual cash savings provided to the Company under this Letter of Agreement from the Effective Date through the earlier of (i) the termination of this Letter of Agreement under paragraph 16 below or (ii) the Exit Date (the "Administrative Claim"). The Administrative Claim shall be extinguished upon the Exit Date unless the Association has terminated the Letter of Agreement under paragraph 16 below.

           11.  Indemnity . UAL and the Company shall provide indemnification on the Effective Date as described in Exhibit F to this Letter of Agreement.

           12.  Plan Release and Exculpation . The Plan of Reorganization shall include a plan exculpation and release provision (which provision shall be at least as comprehensive as the plan exculpation and release provision under the Plan of Reorganization for the debtor or any other person) for the Air Line Pilots Association, International, the United Master Executive Council of the Air Line Pilots Association, International, and each of their current or former (a) members, (b) officers, (c) committee members, (d) employees, (e) advisors, (f) attorneys, (g) accountants, (h) investment bankers, (i) consultants, (j) agents and (k) other representatives with respect to any liability such person or entity may have in connection with or related to the UAL bankruptcy cases, the formulation, preparation, negotiation, dissemination, implementation, administration, confirmation or consummation of any of the Plan of Reorganization, the disclosure statement concerning the Plan of Reorganization, the 2003 Pilot Agreement, this Letter of Agreement, the Revised 2003 Pilot Agreement or any contract, employee benefit plan, instrument, release or other agreement or document created, modified, amended or entered into in connection with either the Plan of Reorganization or any agreement between the Company, UAL and the Association, or any other act taken or omitted to be taken in connection with the United bankruptcy.

           13.  Assumption of the Pilot Agreement . The Revised 2003 Pilot Agreement (other than with respect to the A Plan if the A Plan is terminated) shall be assumed under 11 U.S.C. §365 under the Plan of Reorganization.

           14.  Bankruptcy Actions . The Company and the Association shall take the following actions to seek the approval of this Letter of Agreement by the bankruptcy court in In Re UAL Corporation et al., Case No. 02-B-48191 (Bankr. N.D. Ill.) (the "Bankruptcy Cases"):

                    a.    the Company shall file a motion for approval of the Letter of Agreement under 11 U.S.C. §363, in form
            and substance reasonably acceptable to the Association, by no later than January 21, 2005;

                    b.    the Company shall provide, to the extent reasonably practicable, the Association's counsel with copies
            of, and a reasonable opportunity to comment on, all motions, applications, proposed orders, pleadings and
            supporting papers prepared by the Company for filing with the bankruptcy court relating to court approval of this
            Letter of Agreement; and

                    c.    both the Company and the Association shall support and seek the approval of this Letter of Agreement
            in the Bankruptcy Cases without condition, qualification or exception; shall use their best efforts to obtain the
            support of the Official Committee of Unsecured Creditors and other parties and stakeholders for the Letter of
            Agreement; and shall take every reasonable action necessary to obtain judicial approval of this Letter of
            Agreement in the Bankruptcy Cases without condition, qualification or exception, including the filing of motions,
            objections and appeals.

           15.  Conditions to Effectiveness . This Letter of Agreement shall become effective as of January 1, 2005, subject to the occurrence of all of the following prior to January 31, 2005: (a) acceptance by the United Master Executive Council of the Association, (b) United pilot membership ratification under the Association's Constitution and By-Laws, (c) if required, approval by the Company's Board of Directors, (d) execution by the President of the Association, and (e) withdrawal of the Company's motion to reject the 2003 Pilot Agreement under 11 U.S.C. §1113.

           16.  Termination Rights . This Letter of Agreement may be terminated by the Association, by written notice from the Association to the Company (the "Termination Notice"), given before or after the Effective Date but no later than the Exit Date, but in no event later than sixty (60) days following the occurrence of any of the following events:

                    a.    failure of the court to issue final judicial approval of this Letter of Agreement, without condition,
            qualification or exception, by January 31, 2005;

                    b.    a court of competent jurisdiction enters a final, non-appealable judicial order that the Company is not
            entitled to the termination of the A Plan under 29 U.S.C §1341(c);

                    c.    failure of the Company to implement, through binding agreement or final judicial order effective no later
            than June 1, 2005, revisions to (i) the labor contracts of the Company's other unionized employees and (ii) the
            wages, benefits and working conditions of the Company's salaried and management employees so that the
            aggregate revisions in (i) and (ii) are reasonably projected to produce at least $1.0 billion in average annual cas
            savings in labor and pension costs for the Company from January 1, 2005 through and including January 1, 2010,
            unless such action is cured to the reasonable satisfaction of the Association within twenty (20) days of the
            Termination Notice;

                    d.    the filing by UAL or United of, support by UAL or United for, or judicial confirmation or approval of
            (as the case may be), a plan of reorganization or a proposed disclosure statement which (i) contains any material
            term that is materially inconsistent with the Revised 2003 Pilot Agreement or this Letter of Agreement or (ii)
            proposes or confirms a capital structure or ownership structure that is not reasonably acceptable to the
            Association unless, in either case (i) or (ii), such action is cured to the reasonable satisfaction of the Association
            within twenty (20) days of the Termination Notice; or

                    e.    any other material breach of the Company's or UAL's obligations under this Letter of Agreement unless
            such breach is cured to the reasonable satisfaction of the Association within twenty (20) days of the Termination
            Notice.

In the event of such termination, (A) the Administrative Claim shall be paid on the Exit Date, (B) this Letter of Agreement shall otherwise become null and void in its entirety, and (C) the parties shall thereafter be governed by the 2003 Pilot Agreement (including the A Plan) and without regard to this Letter of Agreement.

           17.  Fees and Expenses . The Company shall reimburse the Association for fees and expenses incurred in connection with this Letter of Agreement as described on Exhibit G to this Letter of Agreement.

           18.  Agreement . This Letter of Agreement is a final, binding and conclusive commitment and agreement between UAL, the Company and the Association. Notwithstanding anything to the contrary in this Letter of Agreement, judicial approval of this Letter of Agreement shall constitute approval and allowance of the Administrative Claim and shall otherwise have the same meaning and effect as the judicial approval of the 2003 Pilot Agreement in the Bankruptcy Cases signed on April 30, 2003.

           19.  Amendments; Waiver . This Letter of Agreement may be amended, modified, superseded or canceled and any of its provisions may be waived only by a written instrument executed by all parties or, in the case of a waiver, by the party waiving compliance. Except as otherwise expressly provided in paragraph 16 above with respect to the delivery of a notice of termination, the failure of any party at any time to require performance of any provision of this Letter of Agreement shall not affect the right of that party at a later time to enforce the same or a different provision. No waiver by any party of a right under this Letter of Agreement shall be deemed or construed as a further or continuing waiver of any such right with respect to the same or a different provision of this Letter of Agreement.

           20.  Notices . Any notice or other communication given under to the terms of this Letter of Agreement must be in writing and shall be deemed to have been duly given on the day it is delivered by hand, on the day it is sent by facsimile with confirmation of receipt by the transmitting machine, on the business day after it is sent by a national overnight mail service (delivery charge prepaid), or on the third business day after it is mailed first class, postage prepaid, in any case to the following addresses: