Mexico's biggest airline, Aeromexico, and its unionized workers forged a last-minute accord early on Saturday to avoid a strike that could have ground some 300 flights and cost 150 million pesos a day, but delayed a decision on a crucial sticking point.
The union known as ASSA, which represents about 1,300 Aeromexico flight attendants, had threatened a midnight strike if it did not get the 5 percent salary hike and 3 percent boost in benefits it sought.
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ASSA had rejected an early proposal by the airline that combined a slightly smaller pay raise with "new competitive conditions" for future hires that the union said would unfairly slash their pay.
In its final offer, the airline proposed to raise attendants' salary immediately by 4.7 percent, boost benefits by 1.5 percent, and set up a committee to make a decision on the prickly issue of new employee contracts by July 1.
Nearly two hours after the midnight deadline for a deal, the union announced it had accepted the proposal.
"Fortunately a conclusion has been reached by the assembly to avert the strike," said Ricardo del Valle, ASSA director.
If no deal is reached on future contracts ahead of the July deadline, the union could not strike, according to Alfonso Navarrete, head of the employment ministry which has been overseeing the negotiations.
The agreement is good news for roughly 25,000 passengers - 14,000 domestic and 11,000 international - who travel daily on Aeromexico's fleet of 56 aircraft and could have been affected by a strike.
Aeromexico, which said it faced losses of nearly $12 million a day if the strike had taken place, also welcomed the deal.
The accords "allow us to reinforce Aeromexico's business plan in the short and medium term, which will translate into important benefits for our clients and business partners," the company said in a statement.
Aeromexico also withdrew a request it made on April 12 for a federal labor disputes tribunal to review the contract, a spokesman said.
The company, which carried 14.8 million passengers in 2012 and operated just over half of all flights between Mexico City and New York and Los Angeles in 2012, went public in 2011.
A group of local businessmen, along with Citigroup unit Banamex and airline Delta, hold stakes in the company, which took advantage of the bankruptcy of rival Mexicana in 2010 to boost market share.
In April, Aeromexico reported a quarterly loss of 122 million pesos on higher operating and debt interest expenses, despite record revenue helped by a boost in international passengers.