Staff Throw United a Lifeline

United Airlines, the world's second largest carrier, yesterday agreed a tentative deal with America's main mechanics union that could enable the struggling business to stave off bankruptcy.

The two sides reached agreement after a weekend of intense negotiations.

United is seeking to cut its wage bill by an annual $1.5bn (£964m) in an attempt to regain control over its bloated cost base.

The new proposal is little changed from the $700m in wage cuts rejected last week by the 13,000 mechanics. The airline, however, has offered further compromises on "quality of life" issues such as unpaid holiday.

Shares in the airline leapt 32% in early trading on Wall Street, reversing a similar sized decline on Friday, when staff rejected earlier proposals.

United's board met yesterday to discuss the repayment of $375m in debt, which it has just two weeks to pay.

But the airline is not safe yet. Members of the union need to approve the revised plan in a vote on Thursday. Scotty Ford, who runs the United arm of the mechanics union, urged members to vote in favour of the agreement, describing it as the "final opportunity" to avoid bankruptcy.

The agreement requires mechanics to take their first four vacation days in 2003 unpaid, and allows them to designate a further four days each year until 2007.

The airline had earlier agreed wage deals with its pilots and its 24,000 flight attendants approved $412m in pay cuts over the weekend.

The mechanics have offered the most resistance and had threatened to put the plan to secure at least $5.2bn in cost savings over the next five and a half years in jeopardy. The tentative agreement represents a pay cut of about 7%.

United needs the support of the unions if it is to secure a $1.8bn loan guarantee from the US government as part of the federal aid programme to help the industry survive the repercussions of the September 11 2001 terrorist attacks.

The industry was already wrestling with the effects of a slowdown in the economy before the attacks.