Our company's last annual meeting was five years ago, in May 2002. 

Many, including our competitors, hoped that meeting would be our last.

We have proven them wrong.

We are here today, as a much stronger and more competitive company.

We have earned the right to have this meeting…..and we have earned the opportunity to discuss our future. 

It is appropriate to take a moment to reflect upon our circumstances in May, 2002.

As difficult as our challenges are today, they pale when contrasted to where we were 5 years ago. 

We have pulled ourselves up and out of a crisis that threatened the very existence of our company; and for which we, and other U.S. carriers, were ill prepared.

In fact, United was least prepared and suffered the consequences of ignoring, or at best failing to respond to, a market environment that had changed forever.

At the shareholder meeting five years ago, a reference was made to a “reduction” in daily cash burn… cash going out the door…from $10 million to $5 million, per day as a positive accomplishment.

The company's operating loss in 2002 was $2.8 billion. 

Let me offer another way to underscore the magnitude of the financial crisis the company faced at that time.

Our fuel expense was $1.9 billion a year, and even if that fuel bill had been zero the company would have lost some $1 billion.

United's costs, among the highest in the industry, were crippling the company.

Agreements with vendors, partners and labor denied the company the flexibility to adapt to the magnitude of change in the marketplace.

As the internet created fare transparency and dramatically impacted pricing, and low cost competition continued to make significant inroads into the U.S. market, we replaced the facts with wishful thinking and hope that economic recovery and revenue improvement would bail the company out.

In 2002 we had to do something extraordinarily difficult for any community of people.

We had to acknowledge that we had failed.

We were bankrupt.

And we were going to file for the protection of the court.  

This was a difficult reality to face…at a time when the company was still dealing with the after effects of 9/11…but, ultimately, it renewed our sense of purpose…simply stated, the preservation of United.  

The safety of our employees and our customers will always be our first consideration and our number one priority.

We were proud then and we are proud today of our safety record.

Just as we did then, we will continue to invest in our world class safety programs and culture.

Everything else at that time had to be reassessed and reevaluated.

We took responsibility for our future.

Our board and our management team identified the hard choices that had to be made for United to survive – to control costs, increase revenue, and improve our customer service.

And, to do more than survive, we took action … to significantly improve our competitive position, while, balancing the needs of our customers, our financial stakeholders and our employees.

Today, five years later, we are focused on our performance agenda. 

We are controlling costs, optimizing revenue and improving the customer experience, through our many continuous improvement initiatives.

As we execute this agenda across the company, we are focused on improving our work environment through better interaction and engagement, to enable our employees and drive performance.

Last year we generated $4 million in operating cash flow per day and we made an operating profit of $447 million.

We took $7 billion out of the cost structure on an average annual basis.

Our fuel costs have more than doubled from $1.9 billion in 2002 to $4.8 billion last year.

Returning to my prior point, had that fuel bill been zero in 2006, in contrast with 2002, we would have made a profit of over $5 billion. 

Over this five year period, against a backdrop of escalating fuel costs, United has improved operating earnings from a loss of $2.8 billion in 2002 to a $447 million profit in 2006, a $3.3 billion improvement

While encouraging, there is still much more to do.

In 2002, we were effectively closed out of the credit and capital markets.

And, as we all can recall, the federal government decided it would not offer us a loan guarantee. 

At exit in 2006, we had $3 billion in financing from leading global financial institutions…and, we have already paid down $1 billion of that loan, saving us some $70 million a year and freeing up valuable collateral.

At the time we filed for the protection of the court, we had $29 billion in debt and other long term financial obligations that we had no way to repay.

Today, we have cut our debt in half.

We have created a solid financial platform for our company, generating significant free cash flow, ending 2006 with $5 billion total cash.

This, as we all know, is extremely important to the future stability of our company; and our ability to succeed in a hypercompetitive environment and navigate the inevitable industry economic downturns.

Last week, we were pleased to see these improvements change our outlook from “Stable” to “Positive” by the Fitch credit ratings service. 

Equally as important as our financial metrics, Institutional Shareholder Services, the prominent advisory service for institutional investors, advised us last week that United outperformed 98 percent of the 8,000 companies they reviewed for quality of corporate governance…

We have indeed come a long way from the dysfunctional governance we had in place prior to our restructuring.

There can be no argument but that we are a very different company today than we were in 2002.

On behalf of our Board, I want to take this important occasion to thank and commend our employees for their dedication, hard work, and resolve…

And I also want to thank our partners in both the public and private sector in the U.S. and in our international markets for their ongoing support.

As we meet today, here in the Field Museum, it is also appropriate to thank our many friends in Chicago.

Our company, United, is your hometown airline today more than ever.

We know how important United's success is to the local economy, our partners, communities and our core constituents: our investors, our customers and our employees… and, we take that commitment very seriously. 

When our management team meets with our Board of Directors, we review our results against a “Balanced Scorecard” which lays out the metrics and goals for our company. 

The four elements we track are:

·         Safety;

·         Financial performance;

·         Customer satisfaction and

·         Employee engagement.

Our scorecard is the monthly measure of our collective efforts with the work of the company.

Today, we are disciplined, we are focused, and we are flexible; we can move when the market moves.

The only constant in this industry is change:   change in fuel price; change in domestic competition; and change in global competition; and geopolitical uncertainty and security issues.

The pace of change in the next five years will likely only accelerate…

And we will take the market as it comes.

We know our customers want a consistent experience every time they fly and we know they expect us to get the basics right.

As a result, we are focused on the work required to be an airline known for its reliability, cleanliness, and courtesy. 

We are working to improve every point of contact with our customers – from their first interaction with United, whether it's our reservations center or united.com, through the airport, boarding, onboard services and baggage claim.

Our customers also want an airline that is going to get them where they want to go at a price, and with a product, that is appropriate for the occasion.

That means putting the right product in the right market at the right price.

We are executing on that commitment to our customers, delivering new products, services and routes, with innovative solutions that meet the changing needs of the market.

·                  Ted is a great example of our successful response to the low cost carriers flying leisure markets.

·                  p.s., our premium transcontinental service connecting New York with LA and San Francisco set a new standard for business travel.

·                  Explus, our 70-seat regional jet with first class and Economy Plus, creates a premium experience for customers connecting through our hubs and flying into smaller markets.

·                  With Economy Plus, our decision to respond to customer feedback by providing more legroom, is not only improving loyalty and customer satisfaction, it is also generating more than $100 million per year in incremental revenue.

·                  For our international customers in United First and United Business, we will be best in class among U.S. carriers.

                    In United First, our new lie flat seat and entertainment product will make us fully competitive worldwide. 

·                  And, with all the odds stacked against us, last year we applied for and we were awarded the only new China route, so that United can now provide service for our customers by connecting the capitals of the U.S. and China for the first time.

Indeed, you might recognize President George Washington, one of our global service members, disembarking from our inaugural flight…a photograph that put United on the front page of the China Daily.

Efforts such as those I described, coupled with the transformation of our sales organization, are changing the relationship with our corporate customers and enabling us to better meet their needs and improve our profitability.

As a result, we have secured more than $200 million of new business from recently acquired accounts; many of them Fortune 100 companies.

And, our contract portfolio improved by more than $70 million annually. 

The transformation of our sales organization is just one example of the opportunity we have to improve all areas of our business.

We are implementing process improvements and standard work practices across the company.

Standard work improves safety, performance, and drives down costs.

This is a huge opportunity, new to United, that we have just begun to tap.

As we reduce variability in our work and implement best practices, our customers can count on a more consistent experience.

We believe that providing better customer service and further reducing costs through standard work are not mutually exclusive.

One example is the implementation of resource optimization in all five of our hubs in 2006.

By employing standard work, we have been able to reduce our aircraft turns by an average of seven minutes.

Seven minutes per turn spread across a network the size of ours adds up to 100 more flights a day.

By year's end, we will have added the equivalent of 9 mainline and 18 United Express planes without purchasing aircraft. 

We are implementing a new process to speed boarding for our premium customers, providing a dedicated lane that gives them the opportunity to board the aircraft when the time is right for them.

The new procedure not only puts the choice in our customers' hands, it also creates a more efficient process for our employees.

We are taking steps to proactively reduce our fuel costs.

All of our pilots and dispatchers have been trained on fuel efficient practices, including taxing out on a single engine, turning off the auxiliary power unit and switching to ground power upon arrival at the gate.

We also are using new flight planning software to more efficiently route our planes.

We expect these efforts to save us more than $30 million per quarter.

Process and system improvements are not limited to operations.

For example, in revenue management we are implementing next generation systems that allow us to optimize revenue in a dynamic and less structured market environment.

As we make these process improvements and adopt standard work practices, we are also making critical investments in tools and training for our employees.

These investments, long overdue, will provide better support for our employees in their daily work.

They will have a significant impact on our ability to make progress in better meeting our customers' service needs, every time they fly.

Five years from today, our discipline, our focus on the customer, and our commitment to continue to balance the needs, … often seemingly conflicting needs …of our investors, our employees and our customers, will keep us competitive in a market that will continue to change faster than any of us can imagine today.

In this hyper competitive market, we will constantly face new challenges.

One week, it will be Skybus, soon to enter the smaller and medium city domestic market, using new high density aircraft at very low fares…reportedly as low as $10…enabled by very low operating costs. 

Another week and it will be Virgin America, competing across the transcontinental United States.

In the international arena, today we compete with mega carriers such as Air France/KLM, the world's largest airline measured by revenue, Cathay Pacific and Emirates, to name others.

Our global competitors have significantly strengthened during the past five years and will continue to do so through significant capital investment, mergers and acquisitions.

Today, U.S. network carriers are not competitive with such international companies.

Competing globally on a level playing field is the only way to secure a more stable and sustainable future for all of our stakeholders.

In the end, there is no “protection” from a competitive market. 

Our company has made progress in recent years, finding solutions to problems others thought insoluble, and opportunity lies ahead

We will maintain our momentum and we will realize the dividends of the work we have done.

We will remain disciplined; and we will relentlessly pursue our performance agenda, looking to the future with confidence.

Indeed, it is now, time to fly.