From the Phoenix Business Journal:

The Southwest Airlines Pilots’ Association confirmed Thursday it has reached an agreement in principle on a new employment contract with Southwest Airlines Co.

A spokesman for the union said the last two issues to be finalized in the process include compensation and retirement plans. The agreement would cover some 5,900-plus Southwest pilots. The Dallas-based airline (NYSE:LUV) has a hub at Phoenix Sky Harbor International Airport.

Some of the highlights of the agreement in principal include a minimum of three 2-percent raises through the contract, which is amendable in August of 2011.

The tentative agreement also includes full retroactive pay back to the amendable date, an increase in 401(k) matching from today’s rate of 7.3 percent to 7.8 percent upon ratification and to 9.3 percent in 2010.

The union said its board will meet next week to finalize the merits of the agreement and decide whether it should move forward to a full ratification vote before the union.

The union added that the agreement is only tentative at this point.

Paul Flannigan, a spokesman for Southwest said Thursday, “This is a positive development. It’s been a long process. There’s a couple more steps to go, but we’re encouraged.”