"Unless we lower our costs dramatically, filing for bankruptcy protection will be the only way we can ensure the company's future and the continued operation of our airline," Jack Creighton, United's chairman and CEO, said in a statement.
Three airlines have already filed for bankruptcy protection this year, citing the sluggish economy, competition from low-cost carriers and a downturn in travel following Sept. 11. United, the nation's No. 2 airline, would be the biggest to seek protection from creditors.
UAL Corp. said it was setting a 30-day limit to try to reach agreements on cost-cutting. Its pilots' union agreed to a 10 percent pay reduction earlier this summer, but other employee groups have rejected proposed pay cuts.
United is awaiting a decision on its application for a $1.8 billion government-backed loan that it says is necessary for it to compete in a difficult market. But Creighton told employees this week that the Air Transportation Stabilization Board appears poised to reject the application without more evidence of cost-cutting.
The airline said it is changing its business plan to build a stronger, more cost-competitive airline, but gave no details pending the outcome of talks with stake-holders, including employees who own 55 percent of the company.
"The changes we need to make are urgent, significant and immediate," Creighton said. "Simultaneously, we are preparing for the potential of a Chapter 11 bankruptcy filing this fall, due to our fourth-quarter debt payments."
The payments total $875 million.
United's announcement follows on the heels of more bad news for the struggling airline industry. On Sunday, US Airways, the nation's seventh-largest carrier, became the first major airline to file for bankruptcy since Sept. 11. US Airways has reached agreements with its pilots and flight attendants on $550 million in wage concession, but is still seeking deals with machinists and gate workers that would save another $295 million.
Smaller carriers Vanguard Airlines and Midway Airlines declared bankruptcy earlier.
The industry leader, American Airlines, earlier this week announced a restructuring plan that will trim 7,000 jobs by March and ground 74 jets.
United officials said they had already taken some of the steps made by American, including retiring 99 planes last year. But they are under increasing pressure to act amid increasing speculation about the possibility of bankruptcy.
UAL's stock fell 29 cents Wednesday to close at a 22-year low of $2.45 a share; UAL stock has lost 53 percent of its value this week.
The company lost a record $2.1 billion last year and another $851 million in the first six months of 2002. It has said substantial losses are expected for the rest of this year as it fights a soft economy and shrunken demand.
"The world has changed," Creighton said. "Revenue isn't coming back the way the industry expected. Demand isn't returning, fares remain low and the industry is grappling with how to respond."