United Airlines says lack of access to capital may force it to file for bankruptcy protection this month unless it wins deep enough concessions from labour and suppliers to stem daily loses of about $1 million.

The US's second largest airline might not be able to refinance an $875 million debt payment due by 2 December, and must also pay $200 million for capital expenditures and $70 million in retroactive pay to its machinists by the end of 2002.

"We have insufficient access to the public capital markets to repay the debt," says chief executive Jack Creighton. His comments came after it became apparent that the Air Transportation Stabilization Board was not impressed with its application for around $1.8 billion in federal loan guarantees. The board wants United to seek concessions from more of its workers, suppliers and vendors, Creighton said in a message to employees.

United has negotiated $560 million in cost savings from its Air Line Pilots Association, but other unions have yet to join, and one - the machinists - is balking. Creighton gave them until mid-September to come to terms on the cuts.

Creighton's stance comes just days after US Airways' bankruptcy filing and highlights the 'no-win' choice facing weaker carriers: to turn to workers and suppliers or to the government as lender of last resort. The stabilization board would not take United seriously until it got more concessions from the unions, says George Washington University Aviation Institute director Darryl Jenkins.

But coming so soon after the US Airways filing, the real possibility of bankruptcy, which would wipe out the unions' 55% stake in United, may make the workers take the situation seriously, rather than dismissing it as a threat or bargaining tool. He says the unions have almost nothing to lose because the stock is selling at a price so low that the markets clearly anticipate a bankruptcy. The shares fell by more than 25% within a day of Creighton's warning.

Creighton, who is about to turn 70, plans to retire soon, which creates a leadership void at United, which is searching hard for a successor.

United has $2.4 billion in cash, and though it has cut its daily losses to $1 million from about $4 million a day, it expects the daily cash losses to increase in the third quarter and worsen in the always slow fourth quarter. Unlike competitors, though, United has deep assets, including its cash reserves and billions more in unencumbered assets such as aircraft.

United's troubles threaten Boeing's capital financing unit, which lists United as its largest customer. Boeing said in a filing with the Securities and Exchange Commission that United's portfolio with Boeing Capital was $1.2 billion in customer financing.

Source: Airline Business