updated 12/23/2005 4:52:46 PM ET 2005-12-23T21:52:46

The federal mediator overseeing negotiations between UPS Inc. and its pilots union on Friday called for an indefinite recess in contract talks.

The recess comes a day after the Independent Pilots Association threatened to ask to be released from federal mediation so it can strike, citing three years of contract negotiations with the world's largest shipping carrier that have failed to produce an agreement.

UPS said this is the second recess since the Atlanta-based company and its pilots have been in federal mediated talks, which began in June 2004.

The company said it was confident a contract agreeable to both sides could be negotiated.

"We've said all along we're confident we'd negotiate a contract that rewards our pilots while keeping the company competitive," said Peggy Gardner, a UPS spokeswoman. "We continue to believe that we will reach an agreement with no disruption in service to customers."

The union still plans to file its request for release on Tuesday, said Brian Gaudet, spokesman for the pilots' union. He said the recess won't impact federal mediator's ability to consider the release — a decision that could come in mid-January.

"All it's doing is continuing to put its shippers and investors in limbo and dragging out any hopes of labor peace at Big Brown," Gaudet said.

Under the Railway Labor Act, the pilots can't strike while under the direction of the federal mediator. The president of the union, however, has said the pilots will strike if released from mediation and no deal is reached after a 30-day cooling off period.

The company and its pilot union are grappling over pay, pensions, work rules and health benefits, among other things. According to UPS, the pilots have average annual salaries of more than $175,000. The highest paid pilot earned roughly $300,000, Gardner said.

The union argues that unlike the passenger airlines awash in red ink, UPS is highly profitable and therefore has the means to further reward its pilots. UPS says it plans to pay its 2,483 pilots more, but needs to make sure the contract it agrees to keeps the company competitive.

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