updated 5/26/2005 6:06:39 PM ET 2005-05-26T22:06:39

United Airlines' labor situation remained in limbo Thursday as a federal judge declined to rule on a threatened strike by the carrier's baggage handlers and customer-service agents until after their contract standoff is resolved.

U.S. District Judge James Zagel put off until June 7 a decision on the machinists union's request for a temporary restraining order that would have barred United from trying to impede a strike.

The International Association of Machinists and Aerospace Workers maintains it has the right to strike if United's bid to terminate its contract is approved by a bankruptcy judge on Tuesday. The two sides are in talks to try to reach a contract agreement that would make that ruling unnecessary.

"Today's decision does not affect our plans to strike United Airlines if we cannot reach an agreement with the company and the bankruptcy judge rules in United's favor," IAM spokesman Joseph Tiberi said.

United contends a strike would be illegal under the Railway Labor Act even if the contract is terminated.

Negotiators continued contract discussions at an undisclosed location near O'Hare International Airport, five days ahead of the court ruling deadline.

Both sides said the biggest remaining obstacle to a settlement is over a pension plan to replace the defined-benefits fund the company is terminating. The company wants the money put into an investment-based 401(k) savings plan, while the union proposes it go in the IAM's own pension plan.

Jake Brace, United's chief financial officer, said the sides intended to exchange new proposals "shortly" as they try to resolve a small number of remaining issues.

Separately, U.S. Bankruptcy Court Judge Eugene Wedoff denied a motion by the flight attendants union to stay his May 10 order approving United's plan to unload its four defined-benefit plans on the Pension Benefit Guaranty Corp., the government's pension insurer.

Flight attendants' spokeswoman Sara Nelson Dela Cruz said the union didn't expect a stay but the motion was "a procedural move that we had to make." The Association of Flight Attendants also is seeking to have the pension termination blocked by federal district court in the District of Columbia or by legislation pending in Congress.

United, a unit of Elk Grove Village, Ill.-based UAL Corp., says it will save an estimated $645 million a year from the pension move and another $700 million annually if it can secure $175 million in yearly concessions from the IAM and $96 million from its 7,000 mechanics. Results of the mechanics' contract ratification vote are due out Tuesday. United's other unions have long-term contracts in place.

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