Marathon talks seal United pay deal

United is on the brink of filing for bankruptcy

Hopes have risen that United Airlines will avoid bankruptcy, after marathon talks between managers and mechanics ended in a pay deal.

The US's second largest airline said it had reached an agreement with heads of the International Association of Machinists Union (IAM) over wage cuts.

"Overnight the company did reach a tentative agreement with the machinists' union on new contract changes for the mechanics," said company spokesman Jeff Green.

The deal will be voted on by union members on Thursday.

Cash injection

The 13,000 strong District 141-M of the IAM returned to the negotiating table on Sunday after having rejected United's pay cut plans last week.

The machinists' rejection put United's restructuring plans in jeopardy, even though a majority of its staff, including flight crews, baggage handlers and pilots, have agreed to pay cuts in return for bonuses several years down the line.

United, which has suffered worse than its US rivals from the global aviation slump, is believed to be on the brink of a bankruptcy filing.

It needs a pay-cut deal across the board in order to convince the US government that it merits a state loan.

Worried investors

Investors have feared that United's parent company, UAL, may be too generous to the mechanics, in the interest of securing a rapid deal.

In talks with other unions, the airline promised that pay would bounce back to current levels at some specific future date.

Combined with other sweeteners, this concession counterbalances much of the cost-cutting benefits in the longer term.

Some analysts believe United should file for bankruptcy protection since that would give it some relief from its debts and a breathing space to more thoroughly restructure its business.

Several major airlines, notably Continental, financially the strongest of the big US carriers, have been in and out of bankruptcy in the past few years.