Benjamin Franklin once said, "That which hurts, also instructs."

As a company, as an industry, as a country ... we were hurt in 2001. We were hurt in ways we didn't expect and in ways we couldn't imagine.

And we learned. We learned about our vulnerability. We learned that what an up-cycle gives, the down cycle takes away ... and then some. We learned that help from the economy will not happen any time soon, and when it does come, it will not bail us out of fundamental problems. We learned in clear and very disappointing terms that we have not freed ourselves from the company-employee contentiousness that has framed this industry for so long. And we learned something else. That we were not just in a fight to protect our ability to grow. We were - and are - in a fight for our future.

Against that background, I want to do two things today. First, I want to present a frank and unvarnished assessment of our situation. Second, I want to look at some of the positives. This is not an attempt to manufacture silver linings. But as we focus on our problems - as we must - our future depends on our ability to understand the strengths that will help us regain our footing and rebuild our confidence as a company.

Our situation is this. We are a company that has made recent progress, but has a long way to go in our climb back to financial stability. Up until September 10, the collapse of the economy was already creating a terrible year. Then, on the morning of September 11, we were thrown into uncharted territory.

United took fast and drastic actions in response. Some of those actions were painful. All of them were necessary. To shore up our financial position, we launched an across-the-board cost-reduction program, we slashed our schedule and we launched the most extensive employee furlough in our company's history.

Those steps did two things. First, they bought us time, because we couldn't continue to operate the pre-9-11 United Airlines with the significantly diminished revenue base from the post-9-11 world. Second, they created the structure for a platform on which we could start to rebuild.

That platform has four main supports. When I was chosen by the Board to be United's CEO back in October, I committed our management team to a recovery program that centered on cutting expenses and capital expenditures, enhancing revenue, maintaining liquidity and reducing employee-related costs. I can report to you today that, in three of those areas, we have made reasonable progress.

First, we've reduced our operating and capital budgets in every way possible.

Second, our president, Rono Dutta, is heading up a strategic initiative that is examining all aspects of our business, including revenue generation, our levels of service, where we fly, how we fly and our seating configurations. In short, we are putting on the table anything and everything that can bring us back to profitability, while allowing us to continue to deliver a memorable customer experience. Rono will present a number of game-changing recommendations to United's board over the next several months.

Third, we have made progress in protecting our cash position. At the end of the first quarter, we had $2.9 billion in cash reserves, which is roughly in line with our key competitors. And while we haven't yet decided to take advantage of it, the federal government's loan-guarantee program is an option we can pursue through the end of June. But I don't want to mislead you. We still have a long and difficult road to travel to reach financial stability.

And that brings me to the fourth issue ... employee-related cost reductions. Here we have not made the progress that I had hoped. We have to find our way around some very big obstacles. Certainly, the recent contract settlements between United and IAM locals 141M and 141 give us a start toward financial recovery. And late last month, we began a serious dialogue with some, but not all, of our union leaders to talk about the employee part of United's recovery plan. At that meeting, the Air Line Pilots Association said it will discuss a program of shared sacrifice by all employees. But our flight attendants have opted out of these conversations, at least for now. And with another union - the Aircraft Mechanics Fraternal Association - making a move to represent our mechanics, that just complicates the situation.

I understand why some of our employee groups may be reluctant to participate. But I don't want to take "no" for an answer from either the IAM or the flight attendants. We need to engage all of our employee constituencies very quickly in order to get the financial recovery program into a higher gear. And the reason is, we face two harsh realities. One, our labor costs were set in a different revenue environment. We must make some difficult - but essential - adjustments to align our costs with our revenue. Two, both time and circumstances beyond our control are working against us. The economy remains uncertain at best. The return of business flyers is an open question.

That's our situation. And as I said, it's very short on good news. But as I also said, there are some clear signs of progress and some clear indications that even in the worst operating environment ever, our employees are producing results.

Those results come in two key areas - our progress in building our financial position and our progress in becoming a better airline.

We have steadily improved our financial results on an absolute basis and relative to our competitors over the last seven months. Our passenger unit revenue performance has improved each month. We have gone from a year-over-year decrease of 29 percent in October to a decrease of only 9 percent in March.

I'm not about to congratulate us for achieving negative numbers, but our first-quarter net loss of $487 million was significantly better than expectations and our results beat those of our largest competitor, American.

Our load factors also continue to improve. Our system load factor in the first quarter was 72% - 4 points higher than last year. However, our yields are still unacceptable - but we are working on improving them. Overall, our first-quarter passenger unit revenue was 11 percent below the first quarter of last year. That compares to a fourth-quarter decline of 24 percent. Improving yield will clearly be one of our biggest challenges going forward.

For this quarter, we're seeing an increase in close-in bookings, which traditionally come from the business traveler. But right now, we don't know if that's going to translate into yield because our fares are already so low. Our unit revenue also continues to improve with each succeeding month. During the fourth quarter, our year-over-year change in system unit revenue trailed the industry by five points. For January thru March, we only trailed the industry average by one point.

Our expense performance has been excellent. And, for that, we can thank the efforts of thousands of employees across the system. Because of their hard work, our expenses, excluding special charges and our fuel subsidiary, declined 19 percent in the first quarter. Since our available seat miles were also down 19 percent, our unit costs on the same basis were flat.

Meanwhile our cash burn was halved from $10 million per day in the fourth quarter to just under $5 million per day in the first quarter, and we expect further improvement in the months to come.

These are good signs, but only signs. We still expect to report a significant second-quarter loss, and a loss for the full year. Returning this airline to stability means more than making us a more financially sound airline. We must also become a better airline - and that means superior customer service and reliable, on-time performance.

Step one is ensuring the safety of our passengers and employees, which is fundamental to providing great service and system reliability. United has taken the lead in security enhancements in the wake of September 11. We were the first airline to complete the reinforcement of cockpit doors. Pending an okay from the government, our fleet is being equipped with Tasers in the cockpits, and our pilots are being trained to use them. We've also begun to provide specialized security training for our flight attendants. We've implemented the federal government's approved comprehensive passenger pre-screening program, and complied with all required security directives regarding the screening of checked baggage.

Importantly, we've made these security enhancements without sacrificing operational performance. From October through January, we dramatically improved our on-time departure and arrival performance. Our December departure performance was the best for any December on record. Our arrival and departure performance set all-time records in January.

And in March, we soared over much of the competition on three measures - on-time arrivals, fewest cancellations and baggage service. Compared to March 2001, we moved from sixth place to third in on-time arrivals and from ninth place to third in percentage of flights completed, according to the U.S. Department of Transportation. Our mishandled bag rate was also near the top of the industry, moving us up from eighth place to third.

During the first quarter, our completion rate of 99.1 percent was one of the highest United has ever recorded. And our first-quarter on-time departure performance was our best in 10 years. That is much more than a reflection of lower demand and less stress on our facilities. It is performance. I want to congratulate all the people of United whose hard work got those bags on those flights and got those flights out on time. They are delivering for our customers - and they are demonstrating our commitment to return to the ranks of the industry's best.

We are also continuing to refine and improve our product offering. We began in the weeks and months after September 11 by creating a completely revamped schedule. As I mentioned, we started by dramatically cutting our capacity. But we didn't stop there. We took a step back, took a hard look at our schedule, and decided to rebuild it. We reduced the number of flight banks we operate at our hubs, but increased the size of those banks to enhance connectivity. We also shortened the flying day and cut out-of-bank flying. These moves are designed to do more than grow market share. They are also helping to improve our revenue. Our rising load factors demonstrate that the rebuilt schedule makes sense for our customers and for United.

As increasing consumer demand improves our load factors, we are starting to add flights. The additions are strategic, they are purposeful and they are matched to demand. In April, we added 127 flights. And we continue to identify markets where we need to be more aggressive to capture business travel revenue. For example, next month, we will be adding 77 new United and United Express flights to serve our hometown, Chicago. We recently reinstated our Chicago-Beijing nonstop and added a second daily Chicago-Tokyo roundtrip flight. And we started service from Tokyo to Taipei last month.

Flying this growing schedule is a fleet of planes that still have that new airplane smell. In fact, we have one of the youngest fleets in the sky. We retired 99 aircraft, leaving us with aircraft that are, on average, just eight years old.

We are making our customers' journeys easier and more comfortable with the Easy products. Each of the Easy products or services is designed to improve the whole travel experience from reservations to departure. We've also expanded our interline e-ticket capability to four carriers. And at our hub airports we have increased security lanes by 50 percent to reduce waiting times.

New technologies like wireless updates and paperless tickets are very important tools of service. But they are not the foundation of service. For that, we've drawn on the heritage of our 75 years in business. We've chosen five straightforward concepts to direct our decisions and guide our behaviors. We call them the Rule of Five. They are based on ideas of Pat Patterson, one of the people who built this airline to prominence, and they are as important now as they were then. We want to give our customers service that is safe ... dependable ... comfortable ... helpful ... and simple. Across global routes, giant hubs, new generations of equipment and a new age of technologies, these are still fundamentals of service.

In closing, I want to discuss my role at United and our focus going forward. As you know, we announced April 30th that we had officially launched a search for a new CEO. That is all according to plan. I was asked to take on the job of CEO to stabilize United, get us back on the right financial track and improve the relationship between management and employees. Another part of my job is to help the Board find the right person to build on our progress, to lead this company through the successful completion of our current to-do list and to take United into the future.

I believe in long-term goals, in corporate visions, in the power of inspiration and aspiration. But for United Airlines today, my focus, our focus, has to be on the present. Because we still have to get through the present to have a future. We must continue to keep costs down. We must find new and better ways to reach common ground. We must put all our energies into the safe, dependable, comfortable, helpful and simple service that will bring customers back. I am confident we will.

This company is being tested. But it's been tested before. United has passed those tests and emerged stronger than ever. And it will pass this one, too. It won't be easy. But building a company from the ground up never is.

But I've seen first hand what the employees of this company can do. I've seen the energy, the experience, the refusal to give in to obstacles. I've seen the progress we've made in the past months. And I am confident. This company will win. Because that's what great companies do.

Thank you very much.