NEW YORK (CNN/Money) - United Airlines and the union representing many of its ground employees reached a tentative labor agreement Tuesday that is likely to help avoid a strike at the nation's No. 2 airline.

A lawyer for UAL told Federal Bankruptcy Judge Wedoff that United Airlines and the International Association of Machinists -- which represents some 20,000 United baggage handlers, customer service personnel and other unionized ground employees other than mechanics at the airline -- have reached an agreement in principal on a five-year labor contract.

The tentative pact staves off a ruling by Judge Wedoff as to whether United could break its existing labor agreement as part of its effort to seek $176 million in annual cost savings from the ground employees union. That ruling was due Tuesday afternoon, and the IAM had threatened to strike if the judge ruled in United's favor. United had charged that such a strike would be illegal,

Now, the two sides have asked for an extension until June 17 to finalize the terms of their deal.

Earlier Tuesday, the rank and file of the Aircraft Mechanics Fraternal Association, which represents about 7,000 United employees, ratified a five-year agreement that cut the mechanics union's wages by 3.9 percent and granted United $96 million in annual cost savings. The vote was somewhat in doubt due to a previous rejection.

In a written statement released late Tuesday afternoon, United said, "This agreement, and AMFA's ratification of their agreement, move us significantly forward in our restructuring and set the stage for our exit from bankruptcy."

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