Collective Bargaining Agreement

2005-2010

Convertible Notes: Exhibit A

Exhibit A
Allocation Formula

Background

These notes, approved by the Bankruptcy Court, partially offset the retirement benefits that Eligible Flight Attendants lost when the United Airlines Flight Attendant Defined Benefit Pension Plan (“Pension Plan”) was terminated and replaced. The AFA has reviewed how the termination of the Pension Plan affected flight attendants, taking into consideration the degree to which that loss will be offset by (i) any continued payments under the Pension Plan that will be made by the Pension Benefit Guaranty Corporation (“PBGC”); and (ii) Company contributions under the United Airlines Flight Attendant 401(k) defined contribution replacement plan (the “401(k) Plan”). This review demonstrated that nearly all flight attendants would be adversely affected by the loss of the Pension Plan should they choose to retire earlier than normal retirement under the Pension Plan at age 65. This review also demonstrated that while all flight attendants were adversely affected by the loss of the Pension Plan to some degree, there was also a smaller group of flight attendants who were most adversely affected by the termination of the Pension Plan. This sub-group generally were those flight attendants who had not yet reached their early retirement eligibility under the terminated Pension Plan but were over the age of 40 and as a result did not have a sufficiently long remaining working career to make up the entire loss of the Pension Plan under the 401(k) Plan.

Eligibility

As a result of its review, the AFA determined that all flight attendants on the Flight Attendant Seniority List as defined in Section 17 of the CBA as of December 30, 2005 (“Eligible Flight Attendants”) should share in the allocation of substantially all of the proceeds from the Sales Transaction. Accordingly, 90% of the proceeds from the Sales Transaction (“Tranche 1”) will be allocated on a per capita basis among Eligible Flight Attendants. In addition, the sub-group of Eligible Flight Attendants most adversely affected (as described above) will receive an additional allocation of the remaining 10% of such proceeds on an age and service weighted basis (“Tranche 2”). These Eligible Flight Attendants will include those who (i) were hired after March 31, 1980, (ii) have ten or more years of service as of June 30, 2005 (the “Date of Plan Termination”), (iii) were over age 40 as of the Date of Plan Termination; and (iv) were not yet eligible for early retirement under the Pension Plan (had not yet reached age 50 even though they satisfied the ten years of service requirement) as of the Date of Plan Termination (“Tranche 2” Eligible Participant).

Total Allocation Amount:
$20,000,000

Holdback Amount:
$1,000,000

Tranche 1 – 90%

Initial Allocation: $17,100,000 (less expenses to sell notes)
Final Allocation: $900,000 (less expenses to sell notes)

Tranche 2 – 10%

Initial Allocation: $1,900,000 (less expenses to sell notes)
Final Allocation: $100,000 (less expenses to sell notes)

Deposit into 401(k)

To the extent permitted under the terms of the 401(k) Plan and the Internal Revenue Code, the allocated proceeds from the Sales Transaction will be contributed by the Company to the accounts of Eligible Flight Attendants under the 401(k) Plan for the 2006 plan year. Any remaining allocated amounts will be paid in cash to the applicable Eligible Flight Attendant.

Tranche 1 Allocation Basis

Tranche 1 shall be allocated per capita to all eligible persons on the Flight Attendant Seniority roster as of December 30, 2005. Eligible persons is further defined by the qualifying rules shown below.

Tranche 2 Allocation Basis

Tranche 2 shall be allocated to all Tranche 2 Eligible Participants. Eligible persons is further defined by the qualifying rules shown below.

A Tranche 2 Eligible Participant shall receive an allocation that is age and service weighted based on the sum of the person’s age and service on the Date of Plan Termination divided by the sum of all Tranche 2 Eligible Participants’ age and service on the Date of Plan Termination.

Other Qualifying Rules:

Actives – yes as of 12/30/05
Furloughed – yes as of 12/30/05
Quits – no
Terminations for Cause – no
Retired – no
Deceased – no

Transfers Between Employee Groups:

If an individual satisfies the definition of more than one employee group, such individual will be assigned to the employee group that will provide the individual with the largest allocation and distribution of proceeds.