United Airlines pilots approve contract extension

(Reuters) - United Continental Holdings Inc's <UAL.N> pilots have voted to approve a two-year contract extension that paves the way for a 22 percent wage hike by 2018, their union said on Friday.

United's management has made securing labor contracts a top focus following a leadership change in September.

For years, the company struggled to conclude joint contracts for flight attendants and maintenance workers following the 2010 merger of United and Continental, hurting workers' morale.

United expects the pilots contract extension and a separate deal for technicians, still open for approval, to add about 2.5 percentage points of unit costs for 2016 compared with a year ago, acting Chief Financial Officer Gerry Laderman said on an investor call Thursday.

"While it will increase costs in the near term, having good labor relations is worth the investment," said Sterne Agee CRT analyst Adam Hackel. "This is a big step towards that."

The airline said it expects unit costs to rise about 1 percent this year, not including the two labor deals.

Out of the 10,569 eligible pilots, 90.94 percent participated in a ratification vote and 79 percent of them approved the agreement, the Air Line Pilots Association (ALPA) said on Friday.

"I want to recognize the efforts of both ALPA's and United's negotiating teams. Their hard work enabled us to achieve this ratified contract extension more than a year ahead of the amendable date," United Chief Executive Oscar Munoz said.

Munoz became CEO in September and spent his first month on the job traversing the United States to meet with workers and flyers for input on how to improve the airline.

Munoz has been on leave since suffering a heart attack in October.

Acting Chief Executive Brett Hart said on Thursday United hopes to reach a deal with flight attendants this year.

Shares of the second-largest U.S. carrier by capacity were up 3.8 percent in afternoon trading on Friday.

The agreement with pilots, due to run through early 2017, extends the term of the existing contract to Jan. 31, 2019, ALPA said.

The agreement, which provides increases in compensation, also includes terms to ensure that wage rate increases are in line with hikes for rival Delta Air Lines Inc's <DAL.N> pilots, if any.

Reuters reported in November that United and its pilots union had reached an agreement in principle to extend the labor contract.

Up to Friday's close, United's shares had fallen 37.3 percent in the past twelve months.

(Reporting by Arunima Banerjee in Bengaluru and Jeffrey Dastin in New York; Editing by Maju Samuel and Saumyadeb Chakrabarty)