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United Airlines – the wholly owned subsidiary of United Continental Holdings Inc. (UAL - Analyst Report) – has signed a tentative agreement with International Association of Mechanists (IAM) for several of its work groups. The pact was signed nearly six months after the unionized ground workers of the largest U.S. passenger carrier rejected a joint labor contract covering workers from both United and Continental airlines. Notably, United and Continental had merged in 2010.

The workers group will include gate and reservation workers, baggage handlers and shopkeepers of United, Continental and two of its subsidiaries Continental Micronesia and Mileage plus. This work group will become the second group within United Airlines to have a joint contract covering workers of both the carriers. United Airlines is still negotiating with its flight attendants over a joint contract.

The tentative deal enhances the hourly wages, job security, pension benefits and healthcare expenses of around 28,000 of its ground workers. The agreement includes a maximum pay rate hike of $24/hour for most of the workers along with the provision for additional rise in the future. As per the details provide by the unions, full-time and part-time employees will receive a signing bonus of $105 and $52.50 respectively.   

National Mediation Board that supervises labor relations in the airline and railroad industry, assisted United Airlines through the negotiations. The deal which runs through till Jan 1, 2017 still requires the sanction from IAM members, who are expected to give their nod by Nov 1, 2013.   

United Airline is currently spreading its network in both domestic and international markets. Within the domestic market, the company has added non-stop flights from Chicago to Elmira, State College and Topeka. The Chicago based company also added a non-stop route between Chicago and Edinburg. The new routes are expected to be operational during 2014.   
We believe that bringing the IAM group under one contract will allow United Airlines to improve operational efficiency by freely scheduling employees within their specific functions and arranging a single set of rules for each work group.

United operates with the likes of Delta Airlines Inc. (DAL - Analyst Report) and carries a Zacks Rank #4 (Sell). However, sector stocks of Republic Airways Holdings Inc. (RJET - Snapshot Report) and Hawaiian Holdings Inc. (HA - Snapshot Report) look attractive with a Zacks Rank #2 (Buy).

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