Some of you may have read the thoughtful recent editorials in the LA Times and the Financial Times, supporting the need for changes in US policy and regulation of the airline industry. I am pleased to see the breadth of issues currently being discussed in the EU-US talks.

My views on this topic have been consistent since I joined the industry, and I will be happy to discuss them in the Q and A session. This evening however, I am going to focus on United.

United had a very good day two weeks ago.

We announced $3 billion in all-debt exit financing from two of the most respected financial institutions in the world  JP Morgan Chase and Citigroup. The terms of the financing are excellent and not at all typical for airlines exiting bankruptcy.

Which, we are now set to do in just a few months.

As we do so, we are a fundamentally better company

• with dramatically lower costs
  
• revenue performance outpacing the industry
  
• improved earnings despite massive fuel cost increases
  
• one of the best records for operational performance of the major carriers
  
• our world-class network is intact
  
• and there are sustainable improvements across the business.
  In sharp contrast to three years ago, when we were losing $3 billion a year.
  
• Our cost structure was among the highest in the industry and we were unable to compete in the US& and had no chance of competing with international carriers.
  
• Our collective bargaining agreements with our employees were uncompetitive with the realities of todays marketplace.
  
• We had unsustainable legacy benefit obligations.

Three years later, these same issues are todays headlines  the only difference is that now it is in the larger context of legacy industry in the U.S.

United has lived these issues for the past three years.

But, by confronting unpleasant realities, we have given United the opportunity to be successful and create value for our employees and future shareholders.

During the restructuring, we also resolved issues that were uniquely our own, including an impossible governance structure that paralyzed leadership and diluted focus on our customers.

Confronting everything that stood between us and viability, we have done more than simply survive.

We have created a competitive company that has earned the opportunity to compete for leadership in the U.S. airline industry& and is well positioned as the global airline industry evolves.

We are here today because we are not in denial about what needed to be done in the past, nor what needs to be done in the future.

We face facts, we call the question and we follow through on decisions& regardless of how tough or unpopular they may be.

This industry will continue to be volatile and unpredictable. Those who will succeed are those who are better able and willing to respond to such volatility and unpredictability.

There is no future for a company that ignores the realities of the competitive marketplace, or ignores the facts that will ultimately determine success or failure.

U.S. network carriers, including United, had been unwilling or unable to deal with years and years of bad decisions&such as agreeing to provide higher and higher wages and benefits, knowing they were unsustainable & building business plans on some hoped for industry recovery, including the demise of United, rather than the reality of the market.

U.S. network carriers failed to respond to radical, permanent changes in the industry ... the low cost carriers and pricing transparency via the Internet & both of which forced airfares down 50 percent lower than they were 25 years ago, when adjusted for inflation.

The industry has lost $32 billion since 9/11, and another $10 billion loss is expected this year.

Our first responsibility was to fix what was broken at United. Face the facts and restructure the company accordingly. We said from the beginning that there would be no quick fix, only sustainable solutions.

By reaching a balance across the interests of our three key stakeholders  customers, employees and our creditors, soon to be shareholders  we have built a solid competitive platform for United.

• We lowered costs, excluding fuel, by 20 percent across the board  which will result in $7 billion in average annual cost savings through 2010.
  
• We increased productivity by 27 percent  eliminating duplication, waste and improving efficiency.
  
• Fleet costs were renegotiated to achieve unprecedented savings  of $850 million annually.
  
• Contracts with our United Express partners are now some of the most favorable in the industry.
  
• Twice in three years, we worked with our labor groups to reach consensual agreements to bring wages and benefits in-line with market reality.
  
• We overhauled our governance structure and leadership team.

And, we confronted the fact that United could no longer afford its legacy pension obligations. As I mentioned at the outset, we are not alone.

As difficult as this was, it was certainly better than liquidating the company.
It preserves jobs for our 55,000 employees, soon to be joined by 500 recalled pilots and 2,100 new flight attendants by the end of next year.

It provides a better return for our creditors, including the U.S. governments Pension Benefit Guaranty Corporation & and provides continuity of global service for our loyal customers.

It is critical for us to continue to balance the interests of our employees, customers and investors in every decision we make at United.

Airlines, including United, have rarely done this well.

Employees have endured the roller-coaster of boom and bust. All too often customers had to bear the brunt of the industrys turmoil. For investors, this industry  for the most part  has been a losing proposition.

The only way to build value for all three is to achieve a balanced approach. And that is what we are doing.

Our decisions are based on the facts& what is best for United, starting with our customers.

Other US carriers are content to provide a commodity product that meets the barest minimum of customer expectations&believing every element of their business is about cost.

We start with our customers & providing products and service they want and value, at prices they are willing to pay.

We have strengthened our domestic network and global connectivity because they are highly valued by our customers. Today we serve more cities and fly more routes than we did in 2002.

United created differentiated products to meet changing customer demand, knowing that even the same customer wants different products at different times.

The business traveler has always been at the heart of United and we will provide the travel experience they want.

Against a backdrop of price reductions and declines in service in the U.S., we created p.s., our premium transcontinental flights, because we believed those customers were prepared to pay a premium for special service and a lie flat bed. And we were right.

Today Uniteds p.s. service was awarded best first class in North America by Global Traveler Magazine.

We introduced Explus across United Express to better accommodate higher-yield passengers.

New 70-seat jets with First Class and Economy Plus have redefined standards in the Regional Jet experience.

United is not only competing for the business traveler; all our passengers and their travel demands are important to us and to the sustainability of our network. We provide a different experience that meets their expectation and price point.

The industry experts criticized our introduction of Ted, flying price-sensitive travelers to vacation destinations. Ted is, in fact, a success story for our customers and our employees and is profitable for United. So much so, that we are expanding Ted to 56 aircraft this year, a 20 percent increase.

For the last 12 months, United is Number 1 in on-time performance among the network carriers and customer satisfaction ratings are running at all-time highs thanks to the efforts of our employees.

We are challenging ourselves to do better work every day & to take a fresh look at everything we do & things that were done the same way for 30 years or more.

A program called FIT  for Fix, Improve, Transform  is making customer service, check-in and baggage handling more efficient and better.

We have outsourced work that we cannot do at a competitive cost& restructured how we sell our product & realigned our fleet & and built new relationships with partners.

We have focused on the things we do well to develop new revenue opportunities by bringing in work that we can do competitively.

United Cargo has been revamped and restructured, improving service levels and international scope. It is now contributing hundreds of millions to Uniteds bottom line on an annual basis and outperforming its plan.

Another great example is right here in San Francisco  the headquarters of United Services, our maintenance and engineering division.

We are engaging technicians, engineers, and management in streamlining maintenance operations.

Maintenance of engines, landing gear and avionics, provided to a growing list of customers, is an expanding revenue source for United, delivering high quality at competitive prices.

San Francisco is very important to United overall, and our 10,000 employees who live in the Bay Area.

We know providing the connectivity to the important economic growth areas in Asia and to global commerce worldwide is critical to San Francisco and to your businesses.

We have increased our service to Asia, adding important new destinations, including Vietnam, Beijing, new service to Nagoya, Japan, and additional service to Sydney, Australia.

We are determined to begin flying from San Francisco to Guangzhou, China, the heart of the Pearl River Delta, one of the fastest growing economies in the world.

Together with our Star Alliance partners, we can fly you to almost any place in the world to compete in the expanding global economy.

United is better positioned today than anyone thought remotely possible three years ago. We have earned the opportunity to compete and we are moving forward.

All that we have accomplished so far says a great deal about who we are today: one company, committed to doing good work, focused on our customers and on competing in a way that is distinctly United.

Perhaps our most important accomplishment is that we have proven, over and over again during the last three years that we have the ability to meet whatever challenges this very volatile industry may encounter in the future.

Facing the facts, calling the question and following through on the tough decisions has become a way of life at United.

Three years ago, Northwest had one of the lowest cost structures and Delta had one of the strongest balance sheets of the major network carriers.

Today, they are heading into Chapter 11 as we are heading out & and many of our competitors  both in bankruptcy and out  are now just confronting the work that we have already done.

United will continue to meet our challenges head-on, confronting reality with real solutions, making the decisions that are right for United, our employees, our customers and our investors.