By Dave Carpenter
The Associated Press

CHICAGO - United Airlines agreed with union leaders Monday to set up a second vote by its mechanics on wage cuts and deferred decisions on almost $1 billion in impending debt payments, buying crucial time in its bid to avoid bankruptcy.

Analysts said the actions slightly improved United's chances of avoiding a Chapter 11 filing.

Under an agreement reached early Monday following intensive talks, mechanics will vote Thursday on the same wage cuts of 6 percent to 7 percent they voted down by 57 percent to 43 percent last week. Contract terms on benefits were revised slightly in hopes of a reversed outcome.

United - which operates five daily flights at Cincinnati/Northern Kentucky International Airport - also said it was deferring a $375 million payment on aircraft-backed loans that formally was due Monday but can be put off as late as Dec. 16, and will use similar grace periods for $500 million owed to German lender Kreditanstalt fur Wiederaufbau - originally due last month. It said it already is in the grace period for another $45 million in various debt obligations.

Altogether, that means United faces imminent debt payments totaling $920 million as it awaits word on whether the government will provide a loan guarantee the company says will be the deciding factor on whether it files for bankruptcy.

"United believes that taking advantage of these grace periods is a fiscally prudent step in light of its current financial situation," the airline said in a statement after a meeting of its board of directors. If a federal loan guarantee is approved, it said, "the company plans to make the requisite payments on these obligations."

The announcement also gave investors new hope after Wall Street had almost written off United's chances of avoiding taking its restructuring into bankruptcy court.

Shares in United parent company UAL Corp. climbed 77 cents to $3.28 in trading on the New York Stock Exchange. The stock's price was still down from before the mechanics' last vote, which prompted a sell-off Friday.

"United still faces a difficult task in avoiding bankruptcy, but the second mechanics' vote provides the airline with a glimmer of hope," Standard & Poor's analyst Philip Baggaley said in a research note.

Even if the mechanics approve the concessions, he noted, United would still need almost-immediate approval of the loan guarantee from the Air Transportation Stabilization Board. It also would have to swiftly process and draw on the $2 billion private loan that the government's backing would enable in time to make its Dec. 16 debt deadline.

Without the mechanics' approval of concessions, the airline is considered certain to be rejected in its request for a federal loan guarantee. With cash reserves thought to be around $1 billion and fast dwindling, United has indicated it will file for Chapter 11 bankruptcy protection if it fails to get the government's help.

The mechanics' targeted share of the $5.2 billion in labor cutbacks is $700 million. A second vote rejection of that amount would almost certainly sink the entire package, because cost-cutting agreements accepted by United's pilots, flight attendants and other employee groups expire Dec. 31 unless all groups sign on.

The Machinists' union, which represents the 13,000 mechanics and related employees, said the changes from the previous tentative agreement are a pledge from United CEO Glenn Tilton to resolve "quality of work-life issues" and a clarification that employees would be able to select which four vacation days would be unpaid under the proposed deal.

Union president Scotty Ford said those two matters were cited as sticking points by an overwhelming majority of mechanics who rejected ratification Wednesday.

Asked to specify quality of work-life issues, union spokesman Joseph Tiberi said they include scheduling of shifts and employee input.

After losing an industry-record $2.1 billion in 2001, United is on course to exceed that loss this year.

United has pledged to keep flying if it files for bankruptcy, but is trying to avoid a filing because its shares would likely be worthless and it would lose control of its restructuring to a judge. The airline is 55 percent owned by its employees.