I am delighted to be with you today, joined by our partner ANA -- a very good friend of United - at this important forum for creating dialogue on issues critical to the business and economic community.  

This is the fifth time I have been in Tokyo since becoming Chief Executive Officer of United Airlines in 2002.  

The first time was five years ago, just one month after United began our restructuring. We were losing more than $5 million in cash every day -- and we had the highest cost structure in the U.S. passenger aviation industry.  

As you might imagine... I remember that trip well.    

Another time was June of last year, when I returned to participate in the dedication of the new Star Alliance Terminal at Narita Airport.  

I remember that trip more fondly.  

It came just four months after we completed our $23 billion restructuring -- lowering our unit costs by 20 percent, excluding fuel, and raising our productivity by one third.

Today, the reinvention of United is well underway.  

A week ago, we delivered our third-quarter financial results.

We generated pre-tax income of nearly half a billion dollars, well over twice our income for the same quarter a year ago, and notably nearly twice that of our largest U.S. competitor for the quarter.

Our operating margin almost doubled to 10.7 percent,   

Our year-to-date operating cash flow is roughly $2 billion, significantly up from last year.

Our cash balance remains strong at $5 billion.

We are strengthening our balance sheet -- in the 20 months since our exit from Chapter 11, we have further reduced debt by $2.7 billion.

We are proud of our results.   But results alone are not what make United relevant to our discussion today.  

What makes us particularly relevant to this forum is that our progress as a company grew out of our acceptance of the reality of doing business in the global marketplace.   The reality that all of us compete in the world as it is -- not the world as it was , or the world as we wish it to be .

As everyone here today knows well:   the reality of our world is that globalization is relentless.   Think of any industry represented in this room; choose any business listed on the Tokyo Stock Exchange; and one can be sure:   it looks nothing like it did ten years ago; and looks nothing like it will ten years from now.  

As the world gets flatter, industries will continue to be transformed by technology, global mobility and communication.

If there is one imperative for every business in the global economy today, it is simply this:   evolve, adapt, reinvent... or risk irrelevance in the global marketplace.

Legacy companies with well known, recognizable brands have unique challenges.   There is the opportunity to leverage important assets -- such as brand loyalty and a strong customer base -- but only if the product or service offered under that brand name continues to be relevant to evolving consumer needs.   We all know examples of great brands that have misread the market and failed to adapt.

This is not just a challenge to business.   Whether we like it or not, this is the reality for every economic region; every country; company and worker in the global economy today.

All of us find ourselves confronting similar and daunting challenges.  

As globalization gives rise to new economic powers within the developing world, the real question for all of us operating in mature economies today is this:   will the legacy systems that contributed to the success in developed nations in the 20 th Century be an asset or an impediment to growth in the 21 st Century?  

The airline industry is a perfect platform from which to focus this discussion, because it is subject to virtually every imaginable challenge -- every human challenge, industrial challenge, financial, regulatory, and security challenge -- throughout the global economy.   And then, of course, we also contend with the weather.

In the United States today, the future of America's airline industry is an example of how legacy issues and perspectives in mature economies can challenge the ability to address the realities of the future.

I will start with some context about the U.S. airline industry itself.  

Before 1978, the U.S. airline industry operated in a regulated environment, with the assurance of what was essentially a guaranteed margin, passing costs on to consumers and extracting a profit along the way.

Competition was muted because until deregulation, the government arranged the route and price structure of the industry.

Commitments were made that were not sustainable if any kind of real competition was introduced into the equation.   And, of course, that is exactly what happened.

In 1978, the U.S. airline market was -- for the most part -- deregulated.

The ambition of deregulation was to drive more choice and better pricing options for consumers by creating a more competitive domestic market.
 

The barrier to entry was low.   New airlines entered the market.   Vigorous competition followed.   [The ambition was more than achieved.]  

Consumers indeed had lower prices and more choices.

Established airlines with historic costs resulting from commitments made in the previous era fought to compete, with pricing that failed to cover the cost of putting aircraft into the sky let alone the cost of capital.   It destroyed value for airlines and their shareholders.

As I said a moment ago, the U.S. airline industry is an example of how legacy issues can challenge the ability to address today's realities of the global competitive market place;   and that is in two ways, both of which are only now getting the visibility they have long deserved.

First, we have a total of 150 certificated airlines in the U.S.

• Including six majors,
• nine low cost carriers
• and 16 regional carriers.
  

The U.S. government's desire to keep the industry fragmented, driven by domestic market concerns such as those I described a moment ago, has led to a resistance to the normal order of free market activity.

In the banking industry, in financial services, in energy, in media, in information technology, we have seen companies combine strengths to capture synergies and deliver global scope and scale... not so in the airline industry.  

For U.S. network carriers that also compete internationally this environment has been limiting in terms of preparedness for the world as it is today.  As the impact of globalization has been felt around the world, competitors outside of the U.S. have begun to adjust to the new market reality -- the first of any significance in size has been the merger of KLM and Air France some four years ago.  

The second example is the issue of infrastructure modernization -- more specifically, the impasse in the United States Congress over legislation that funds the Federal Aviation Administration, which is responsible for overseeing the industry.

For 30 years, America has been debating improvements to its air traffic control system.

The air traffic control system has been in place since the 1950s - a huge network of ground-based control towers that are based largely on where bonfires and electric beacons were built in the 1920s to guide air mail pilots.

As the U.S. Secretary of Transportation, Mary Peters, said in a speech earlier this month, "America is fast reaching the limits of its current aviation system.   Dated systems are straining to keep pace with today's air traffic.   It is clear that to ensure freedom, convenience, and reliability in our skies, we must bring (the U.S.) aviation system into the 21 st Century."  

The technology exists to do just that.   A satellite-based system will allow planes to fly safely, fly straighter, fly closer, and fly better in bad weather; while vastly reducing congestion and reducing emissions, which will benefit the environment. We even know how much it will cost.  

The problem is, as in any mature economy, the existing structure has established participants and beneficiaries -- each fighting for their own interests and each unwilling to accept change or anything other than that which they previously enjoyed.

Not surprisingly, every special interest in the industry has disagreed about how to pay for new air traffic technology, and how to implement it... And the U.S. has gridlock both in the debate and in the sky.     

In the end, this is a fundamental issue of competitiveness.   Aviation enables associated businesses across the U.S. to make money, including those who need the certainty of travel to transact their business.

If we don't get our collective resolve together to bring the infrastructure into the 21 st century, it will cost the U.S economy some $15 billion a year in lost productivity -- going up to a projected $22 billion by 2022.

Perhaps more importantly, we will be at a serious competitive disadvantage to countries and regions of the world that are modernizing their infrastructure -- or, building state of the art infrastructure in new growth economies.     

The lesson for all of us who participate in the global economy is clear:   you cannot draw a line in the sand and say you would rather not participate in globalization.  

There is no place for historical biases in the midst of historic shifts.   We cannot recuse ourselves from the global economy.   Technology virtually ensures further integration is unavoidable. Parochial issues are unsustainable.  

Legacy issues undermine competitiveness.   Defending them at the expense of progress only invites the rest of the world to pass one by.  

We have seen a glimpse of the future.   Dubai, home to an airline with $30 billion of orders for new long range aircraft, is building an example today; a new airport with the latest technology, best passenger comforts, and six runways

-- all capable of landing the world's largest new passenger aircraft -

to serve as a new global, 24 hour hub.   Dubai understands:   it is not written that inter-continental flights have to stop in Europe -- just because they always have.   They can just as well stop in Dubai.  

Leadership, in any age, requires certain things. But leadership in the global age requires one quality more than anything else:   A willingness to accept the facts as they are...

A fact-based candor about one's competitive circumstances. It requires you to be honest about your challenges.   It requires a resolute determination to speak the facts, and to see the world as it is -- not the world as it was, or the world as we wish it to be.

Now, more than ever, competition is a choice.   As a company or country, you can choose to be competitive... and Narita is a good example of that.  

We all remember the terminal as it was five short years ago - overcrowded, incapable of handling the traffic at that time, and certainly not able to facilitate the traffic we foresaw for the future.  

The Narita Airport Authority, our partners in the STAR Alliance, ANA, and United together recognized that in this business, airports compete just as airlines compete.   We also faced the facts:   over the past decade, Narita had been losing ground to significant new airport development in other regions that mirrors the growth and potential of Asia itself.    

As I said on the day we dedicated the new terminal, it is a difficult task to take a facility, or a company, which has known some success in the past, and reinvent it to meet the needs of a very different market environment - so that it can compete successfully with new market entrants that do not have the costs and mindset associated with a mature business.  

Narita was a major undertaking.   But the terminal has been transformed.  

Narita now has a world class international airport facility that puts it right back in a leadership position that is so important for the economic growth and infrastructure of Japan.  

ANA made the same choice, the choice to compete... always aware of the global framework in which they operate. From a regional company, they have become a formidable global brand.  

Of course, making the choice to compete is an experience we know something about at United as well.   

Five years ago, we were a "hope-first, facts-second" company.   In other words, we replaced facts with optimism and the hope that economic recovery and industry revenue improvement would rescue us.   It did not.  

In 2002, we had to do something extraordinarily difficult for any community of people.   We had to tell one another the truth.   The truth was, we had failed.   We were bankrupt.   We finally agreed to see the world as it was... and not as we hoped it would be.   We accepted the new market reality.  

As I mentioned at the start of my remarks, over the past five years, we have accomplished a great deal.

Our financial and operational results through nine months of this year are evidence of the progress we have made to strengthen our company.  

These results, driven by the decisions and the work we are doing every day to fundamentally improve our company, have enabled us to look to the future and create a five-year plan that will position us to compete.  

We plan to invest $4 billion to improve our products and operations to keep us competitive, and we will continue to be steadfast in our commitment to Japan and Asia.  

Today, United is the largest transpacific carrier, offering more non-stop passenger flights between Asia Pacific and the U.S. than any other airline.   In fact, nearly 25 percent of our capacity is deployed in the region, with Japan the largest market, accounting for approximately 40 percent of our capacity throughout Asia.  

Our position in the region is strengthened by our important alliance relationships with ANA, as well as with Asiana, Thai Airways, Singapore Airlines, Air New Zealand, and most recently Air China and Shanghai Airlines.     We will continue to build our relationships in the region and increase our service here in the years ahead.

We will never take anything for granted based simply on our past.   We know we have to earn our right to relevance in the marketplace with our customers every day -- to compete against the best the world has to offer

Customers are making their choice, and they are going global - and at United, we are going to join them.  

Our investors expect that of us, and they acknowledge the progress we have made in reinventing ourselves, with comments following our third quarter results such as: "The company continues to produce industry superior results in (revenue) load factor, yield, operating margin, earnings per share, and cash per share."

And, observations such as: "(United) is blessed with an asset that is yielding strong results - a large Pacific/China route system where demand is strong..."  

We can still be encumbered by those things out of our control -- not only the competitive demands of the global aviation industry that would include the escalating and unpredictable price of fuel - but also the inexcusable foot-dragging within the United States on modernization of air traffic control.  

It brings me back to what I said at the beginning of my remarks.

The real question for developed economies today is whether the legacy structure that contributed to success in the 20 th Century will be an asset or an impediment to growth in the 21 st Century.  

For those of us within developed countries and economies who understand how the world has changed -- and acknowledge that it will continue to change and are resolved that we will evolve, adapt and reinvent ourselves -- the opportunities are unlimited.  

There is no region where such opportunities are greater than Asia and we look forward to being a significant presence in Asia for a long time to come.  

Thank you.   I'll now be happy to take your questions.