Are they in or are they out? That was the question on the minds of

UAL

(UAL) - Get Report

investors Thursday, amid reports that the airline's machinists union had withdrawn from a key labor coalition that recently offered $5 billion in pay and benefit cuts to keep the carrier out of bankruptcy.

Investors sent UAL shares down 5.4% to $1.77 late Thursday on concerns that if the coalition were to fray, then UAL, the parent of United Airlines, wouldn't be able to secure a $1.8 billion government-backed loan and most likely would have to file for Chapter 11 protection.

For its part, the International Association of Machinists said it hadn't exited the pan-union coalition, but rather, had begun one-on-one negotiations with UAL management, which means the coalition's plan to offer $5 billion in concessions over the next five years is still alive. At issue now are the details on which of the five unions in the coalition will give up what -- a difficult task with every union at the table at the same time.

While all parties attempted to put the latest news in a positive light -- union and management both said the one-on-one-talks have been in the cards all along -- the news highlights the fact that UAL still lacks the wage concessions needed to submit a complete loan application to the Air Transportation Stabilization Board. And without a complete application, UAL can't get its hands on the liquidity it needs to avoid bankruptcy.

"We plan to enter into bilateral negotiations with each of the coalition members, as we have always expected to do, and that process began today with the International Association of Machinists," said UAL, in a statement on Wednesday evening.

By midday Thursday, the IAM had responded with a statement of its own, telling union members that negotiations would begin next week. "Individual negotiations are necessary to bring about any cost-saving measures that would call for specific language changes to each union's collective bargaining agreements," said Frank Larkin, spokesperson for the IAM. "This means the negotiations are moving on, rather than starting over."

James Corridore, analyst with Standard & Poor's, said, "I thought it would be really hard for the five

unions to work together, to get them to all agree on who will give up what and how much -- it will be a hard sell. Time is running out for United, they have this huge debt repayment in November and December, and they have a retroactive payment to union groups. It couldn't have come at a worse time."

Indeed, UAL has just one month to get its house in order before the bills start pouring in. On Nov. 17, the company has a $300 million bank revolving credit facility coming due, followed by a $575 million aircraft-backed security on Dec. 2 and a $70 million back payment due machinists on Dec. 15. All told, UAL owes $945 million before the end of 2002.

But getting UAL's finances in order, especially now that negotiations have moved to a one-on-one basis, will be difficult because unions are still smarting from earlier concessions.

"This year, most work groups got the first wage increase in eight years, and there is a certain resentment about giving that back," said Corridore. "In 1994, they gave concessions to gain a stake in the company that is almost worthless. They didn't benefit when the industry was up, and now when it's down, they're expected to give back concessions again."

With its debts coming due in just five weeks, the company needs to not only produce a new loan application, but also receive government approval and work out new arrangements with banks. Even if all goes well, UAL is cutting it close.

"I think it's going to be very difficult," said Ray Neidl, analyst at Blaylock & Partners. "All parties are going to have to try to save this company. But it can still be done."