CHICAGO (REUTERS) — United Airlines, racing to avoid bankruptcy, faces a critical week trying to obtain loan guarantees with the government and essential wage concession deals with its unions, the chief executive said Monday.

United, the No. 2 U.S. carrier, is trying to avoid a Chapter 11 filing this autumn even as it burns through more than $7 million in cash a day and has nearly $1 billion of debt payments coming due starting next month.

“There is no doubt we face perhaps the most challenging time in United’s history,” Chief Executive Glenn Tilton said on a weekly taped message to employees.

“This week is, again, most critical,” he said. “We are scheduled to meet with the Air Transportation Stabilization Board to update our loan-guarantee application, the United board has its normally scheduled meeting this week and we continue to press ahead on all fronts, financially and operationally, toward a more competitive and repositioned United.”

The ATSB, created after the Sept. 11, 2001 attacks threw the airline industry into havoc, is considering United’s request for backing of $1.8 billion of a $2.0 billion loan. The airlines, owned by UAL Corp, submitted the proposal in late June.

Although no official word from Washington was made public, United executives said feedback this summer from the government indicated deeper cost concessions were needed.

United’s labor costs are among the highest in the industry, thanks in part to an industry-leading contract won by pilots in the summer of 2000. Mechanics and other workers also won industry-leading contracts earlier this year, after having received no pay raises since 1994.

The airline has been negotiating with its five major unions on concessions but has yet to reach individual deals.

The Elk Grove Village, Illinois-based airline said when it released third quarter results Friday it was making progress on talks with labor groups over a new wage-cut target of $5.8 billion over 5-1/2 years. That was just slightly above the $5 billion over five years that a labor coalition offered management several weeks ago and well below the $9 billion United asked for in August.

The International Association of Machinists, representing the largest number of workers, has said pay cuts may not be necessary. The IAM said Friday that talks were progressing well.

The Air Line Pilots Association, which originally agreed to 10 percent pay cuts in return for stock options and raises later, also said its contributions will be finalized soon.

Shares of UAL rose about 13 percent on the New York Stock Exchange in Monday morning trading to $1.94 but have lost 85 percent of their value this year.

United’s cash fell by $700 million to $2 billion in the third quarter ended late September, and executives said the fourth-quarter cash burn rate will outpace the $7 million a day of the third quarter. The fourth quarter is traditionally weak for airlines as summer travel winds down.

All major U.S. carriers are suffering from weaker revenue in the post-attack environment and the weak national economy, Seven of the top eight airlines last week reported a combined $2.2 billion net loss for the third quarter.

UAL posted a third-quarter net loss of $889 million Friday, following a record $2.1 billion net loss in 2001 and another $850 in the first half of this year.

Tilton said bargaining with the unions continued over this weekend.

“We are focused on attaining very real and prompt labor cost reductions of approximately $5.8 billion over the next 5-1/2 years, which would result in an earnings contribution of more than $1 billion per year to United’s bottom line,” he said.

The fourth-quarter cash obligations include a Nov. 17 repayment of $300 million on a bank revolving credit line, a secured debt payment of $575 million on Dec. 2 and a $70 million retroactive payment to the machinists union also in December.

Earlier Monday, Salomon Smith Barney analyst Brian Harris said he reduced expectations for United’s fourth quarter to a loss of $10.35 per share from a loss of $8.25 per share, and for all of 2003 to a loss of $22.50 a share from a loss of $19.50 a share.

He said he United’s third-quarter revenue was lower than expected.