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BA, Gate Gourmet talks extended

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LONDON, England -- Gate Gourmet, the troubled catering company that supplies British Airways, has pushed back a deadline to reach a new contract agreement and avoid bankruptcy administration in the UK.

U.S.-owned company, which provides BA with 80,000 in-flight meals a day, had set a Tuesday afternoon deadline to improve its deal.

Gate Gourmet said in a news release that it now "expects to make a statement on Wednesday."

The company also said it remained in last-ditch talks with a union at the center of a staffing dispute.

"For the situation to be solved, it requires a deal with the union and with BA. Talks continue," a Gate Gourmet spokeswoman told Reuters.

The firm, owned by U.S. private equity firm Texas Pacific Group, sacked 660 workers almost two weeks ago.

The move sparked an unofficial strike by baggage handlers, leading to flights being grounded and causing travel chaos for tens of thousands of passengers.

Some of the 660 Gate Gourmet workers have since been reinstated.

The Transport and General Workers Union (T&GWU), with established roots at both firms, is demanding Gate Gourmet take back all the workers, a move which the loss-making catering firm has rejected.

Gate Gourmet is calling for BA to improve its current contract with the caterer, which lasts until 2008 or face the risk of its UK operations going into administration.

BA had offered Gate Gourmet improved terms as well as a contract extension of two years to 2010 last month, but no deal has been signed.

The showdown reflects union resentment over Europe's third-largest airline selling its catering operations to Gate Gourmet in 1997 and pressing for cheaper contracts since.

Current owners Texas Pacific Group, a U.S. private equity firm, are also frustrated after four consecutive years of loss in the UK. Gate Gourmet's UK arm lost £22 million ($39.68 million) last year and management says it is set to lose more in 2005 unless changes are made.

Rival UK airline Virgin Atlantic dropped Gate Gourmet in March, adding to the caterer's troubles.

BA, one of the world's most profitable carriers, cannot turn to another caterer for an immediate solution if Gate Gourmet falters as no other has operations large enough at BA's Heathrow Airport base in London to fulfil its needs.

Gate Gourmet is the world's second largest airline caterer -- after LSG Sky Chefs -- with 1,400 workers based at London's Heathrow and about 1,100 elsewhere in the UK.

The airline has said it expects Gate Gourmet to continue to supply meals even if it is placed into administration and accountants brought in to lead restructuring of the firm.

But administration could increase the chances of more disruptions to meal service on BA and with that further damage the airline's reputation.

Gate Gourmet resumed delivery of hot meals for BA's outbound long-haul flights from London's Heathrow Airport on Monday after a lapse of more than a week while in-bound flights still have none.

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