NEW YORK (CNN/Money) - UAL Corp., the embattled parent of United Airlines, said Friday that bankruptcy is not inevitable and that it is making good progress on cost-cutting issues, even as it reported a whopping third-quarter loss that was wider than Wall Street expected.

UAL, the No. 2 U.S. carrier, reported a third-quarter loss excluding items of $503 million, or $8.82 a share, narrower than the year-earlier loss of $542 million, or $10.05 a share. However, it's wider than the $7.42 a share loss consensus forecast of analysts surveyed by earnings tracker First Call.

The company has been negotiating with its machinists' union this week over whether pay cuts should be part of the company's overall cost-cutting plan to avoid a bankruptcy filing. The International Association of Machinists has said it wants recognition for $500 million in retroactive pay deferral it agreed to earlier this year.

UAL said Friday the company and a coalition of unions are making progress toward a $5.8 billion cost-savings target to be achieved over five-and-a-half years.

"These discussions need to be brought to a quick resolution to achieve our common goal," UAL Chief Financial Officer Jake Brace said.

"Those talks are ongoing today and they are progressing well," Joe Tiberi, spokesman for the International Association of Machinists, said of the negotiations Friday.

Separately, the Air Line Pilots Association said Friday that four out of five unions had reached an agreement in principle with the company to save more than $1 billion in cash labor savings as part of a $2.5 billion annual recovery program.

"The labor savings framework is an enormous milestone for the company, its employees and shareholders," said Paul Whiteford, chairman of the Air Line Pilots Association. " Whiteford said the agreement would stabilize the company and permit United to obtain critical federal funding.

"We remain confident that this comprehensive economic recovery plan is the best solution to United's financial crisis and is essential to save our company," Whiteford said.

UAL (UAL: down $0.01 to $1.72, Research, Estimates) shares were down slightly in Friday trading.

The airline, along with the rest of the industry, has been plagued by crumbling business since the Sept. 11 attacks a year ago. Many airlines, including UAL, have been unable so far to turn things around in spite of special federal grants to keep them flying.

UAL cut its forecast on capital spending for the year, saying it anticipates a total of $1.1 billion, which is $100 million lower than previous guidance.

The firm also cut non-aircraft capital spending by $100 million for the second half of this year, and said there will be no capital spending on aircraft in 2003, reflecting previously announced aircraft deferrals.

Nevertheless, the company remained optimistic about staying in business.

"While no one underestimates the magnitude of the challenge, we are making good progress on our financial recovery program," UAL Chairman Glenn Tilton said. "We continue to work vigorously with all of our unions and other parties to achieve our number one goal: restoring the financial health of this airline without the necessity of an in-court process."

"At this point nobody should consider a Chapter 11 filing inevitable," Tilton added.

The company said it expects to report a "significant" fourth-quarter and full-year loss related to the Sept. 11 impact, thought it did not provide specific guidance. Analysts on average anticipate a loss of $8.35 a share for the fourth quarter and $31.66 a share for the year.

Including items, UAL's quarterly loss was $889 million, or $15.57 a share, better than the year-ago loss of $1.2 billion, or $21.43 a share.

Third-quarter revenue fell 9 percent to $3.7 billion from $4.1 billion a year ago.

UAL also cut operating expenses by 9 percent to $4.4 billion. The load factor, which measures how full planes are, was 75.4 percent, based on a 7 percent decline in capacity. However, that's a slight improvement over a year ago, the company said.

The company also recorded a $418 million non-cash tax expense.