United pilot deal includes 13.5 mln stock options Wednesday June 19, 4:46 PM EDT By Kathy Fieweger CHICAGO, June 19 (Reuters) - United Airlines pilots would accept a 10 percent cut in base pay in return for about 13.5 million stock options and raises later, under a concession deal that union leaders will vote on later Wednesday, sources told Reuters. In addition, the deal would enable 9,000 pilots at United, the No. 2 U.S. carrier, to approve or reject any acquisition of another carrier proposed by management. Airline industry experts doubt any merger deals are likely soon, given the disastrous state of the industry's finances since the Sept. 11 attacks. But such a provision would relieve a sore spot after a merger deal between UAL Corp.'s(UAL) United and No. 6 US Airways Group Inc.(U) fell apart last year and left many workers angered at the wasted effort. Pilots, represented by the Air Line Pilots Association, would also authorize a proposed code-share deal between United and US Airways, under the tentative deal. The two airlines are reportedly close to sealing such an arrangement, which generates revenues when each airline is allowed to put its code on the other's fares in computer reservation systems. If approved by rank-and-file membership, the pay cuts would become effective upon approval of loan guarantees from the Airline Transportation Stabilization Board, a new federal agency set up to administer a historic bailout program. WORKERS' WAGES WINNOWED United, based in Elk Grove Village, Illinois, is seeking concessions from all employees as it embarks upon a financial recovery plan and prepares to apply for the federal loan guarantees to back up private loans. UAL reported a record $2.1 billion loss in 2001 and another $510 million loss in the first quarter of 2002, but says it has plenty of cash and unencumbered aircraft to weather the current industry downturn. The airline on Tuesday announced $430 million in wage cuts over three years for 11,000 non-union workers. So far, unionized machinists and flight attendants are not willing to participate in concession talks. While pilots' base pay would be cut by 10 percent initially under the tentative deal, a 7 percent raise would kick in starting in 2003, followed by 8 percent in 2004 and 8.6 percent in 2005. That would take overall pay about 3 percent higher than the current pilots' contract provides. Pilots at United own 25 percent of the airline under a 1994 Employee Stock Ownership Plan (ESOP) designed to foster labor harmony. Machinists own about 20 percent and salaried and management workers own about 9 percent. Another tenet of the new deal, which reportedly would require approval from the machinists, says pilots could "diversify" or sell out their ESOP holdings up to a maximum of 50 percent starting in 2004. Currently, employee stock owners cannot sell ESOP shares until they retire or leave the company. United would not comment on any portions of the proposed deal. On Tuesday, spokesman Joe Hopkins also declined to comment on the United/US Airways code share talks. REGIONAL JETS INCREASED Another provision involves increasing the number of regional jets that pilots would allow the airline to fly. Under the current contract, reached in 2000, the airline was required to fly a so-called floor or minimum number of 451 narrow-body jets and 156 wide-body jets. Under the concession deal, the number of narrow-bodies would drop to 388 jets for 2002, 2003 and 2004 and rise to 400 in 2005. United parked a number of Boeing 727s and 737-200s after the Sept. 11 the attacks, putting it in danger of violating "scope clause" agreements with pilots that limit the number of regional jets that could be flown. Shares of UAL closed 35 cents lower on the New York Stock Exchange on Wednesday, down 2.7 percent to Roger EWROPS