updated 8/25/2005 5:50:56 PM ET 2005-08-25T21:50:56

Catering firm Gate Gourmet Inc. said Thursday it had struck an agreement with its employees’ union aimed at ending a labor dispute that led to the grounding of hundreds of British Airways flights earlier this month.

The U.S. firm said the Transport and General Workers’ Union had agreed to a “nonbinding framework” that would see Gate Gourmet seek voluntary layoffs among its workers, including more than 660 who were fired for holding an unofficial strike.

Financially troubled company said the layoffs were aimed at “reducing our work force to levels agreed upon by the union that will make the company economically viable.” It did not put a number on the redundancies.

Brendan Gold, the union’s chief negotiator, said more talks had been scheduled after a productive meeting with managers of the catering company, which provides in-flight meals to British Airways.

“After a constructive meeting, we have made initial progress towards resolving the problems, with an outline of how to go forward that would apply to all workers,” Gold said.

Gate Gourmet fired 660 employees who staged an unauthorized walkout over working conditions in London earlier this month. On Aug. 11, British Airways ground crew at Heathrow Airport walked out in sympathy, leading the airline to cancel scores of flights, stranding more than 100,000 travelers.

Ground crew returned to work the next day, but it took a week to clear the backlog of stranded passengers.

Gate Gourmet has threatened to file for bankruptcy in Britain unless it can sign a deal with BA, its biggest client. BA has said it is ready to sign a new contract with Gate Gourmet, but only if the company’s labor dispute is resolved.

The sticking point has been Gate Gourmet’s refusal to re-hire all the sacked workers. The union has demanded the workers be reinstated, and threatened further strike action if they are not.

Gate Gourmet said Thursday that the framework agreement “will allow the company to address its ongoing staffing needs in a way that is fair to all employees, adopt necessary work rule changes, and stem the losses that have put the company on the brink of administration.”

It said it could still make compulsory job cuts after the voluntary layoffs.

U.S. private equity firm Texas Pacific Group bought Gate Gourmet from the bankrupt estate of Swissair in 2002.

Gate Gourmet has been in financial restructuring talks all year, with creditors owed about 670 million Swiss Francs ($527 million). Management has estimated the company will lose 25 million pounds ($45 million) this year. Neither Gate Gourmet or BA would put a figure on their contract.

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