By Alana Wise
NEW YORK (Reuters) - Union mechanics at United Continental Holdings Inc (N:UAL) on Monday ratified a six-year joint collective bargaining agreement with the airline, marking the end to several years of contract talks between the two parties.
The agreement, approved by United mechanics who are represented by the International Brotherhood of Teamsters, is a major step toward integrating United and Continental, which merged in 2010, and reducing flight cancellations.
Under the contract, 9,000 mechanics at United, the No. 3 U.S. airline by passenger traffic, will see pay hikes that will put their compensation packages "2 percent above the highest compensation in the industry every two years."
"This contract represents the largest contract for a mechanics group in airline industry history," the director of the Teamsters airline division, David Bourne, said in a statement. "It is a package worth a collective $1.7 billion in improvements in compensation and benefits over the current agreement."
United Airlines shares were down 1.5 percent at $68.26 by day's end in the New York Stock Exchange.
United expects the mechanics’ contract and an additional payout to pilots to match a wage increase at rival Delta Air Lines Inc (N:DAL) will add between 1.5 and 2 percentage points to its unit costs, excluding fuel and other expenses, in 2017, its Chief Financial Officer Andrew Levy said last month during an investor day presentation.
In total, the company expects unit costs to rise between 3.5 percent and 4.5 percent in 2017 from a year earlier.
United said on its last quarterly earnings call that cheap airfares and higher wages from new contracts would squeeze its results this fall, making it difficult to be as profitable as competitors.
Nearly 52 percent of the 8,123 voting members supported the agreement, an upswing from the just 7 percent who voted in favor of a previous contract.
Without a joint contract, United and Continental crews had been staffing separate flights since the merger. When a flight on a pre-merger United plane was short-staffed, pre-merger Continental employees could not be brought in, and vice versa, sometimes leading to cancellations.
That is slated to change with Monday's news and a contract recently reached with the flight attendants.