Lufthansa has reached a deal on pay and working hours with the Verdi union for ground staff at the airline to help it cut costs, Verdi and Lufthansa said on Wednesday.

Under the accord, which followed marathon talks over three days, staff will receive one-off payments in March 2005 of 0.5 percent of their salary and in March 2006 of 1.6 percent of their salary instead of having pay rises.

Lufthansa agreed to give two year job guarantees for the airline's approximately 37,000 ground staff, with some exceptions, the union said. And the deal will include profit sharing for staff.

The employees' working week of 37.5 hours may be increased or lowered by 2.5 hours to make rotas more flexible, while the limit at which overtime starts being paid will increase. New staff will receive less holiday, Lufthansa added.

The productivity measures will enable Lufthansa to lower ground staff costs by EUR150 million (USD$200 million) over the next two years, excluding the pay freeze, the airline said.

"The two-year duration (of the deal) gives us planning certainty and stability for personnel costs," said Lufthansa staff chief Stefan Lauer, who has been leading the talks for the airline.

The agreement also applies to Lufthansa's 14,000 cabin crew, Verdi said. But Lufthansa said it will have to hold further talks with the UFO union, which represents most of the 14,000 cabin crew at the airline, before an agreement is announced for cabin staff.

The accord came two days after the Vereinigung Cockpit union agreed to a pay freeze and longer hours for Lufthansa's 4,400 pilots to enable the carrier to reduce costs by EUR55 million (USD$73.3 million) annually.

The news also came shortly before a meeting of Lufthansa's supervisory board on Wednesday and marks the conclusion of negotiations that began in autumn 2003.

Lufthansa is trying to reduce overall costs by EUR1.2 billion (USD$1.6 billion) by 2006, including a EUR300 million (USD$400 million) cut in staff costs.

The airline had agreed a framework with Verdi for more flexible working times in June as a step towards reaching a full agreement. A deal was delayed as negotiations continued between Lufthansa and Cockpit.

Lufthansa's pilots agreed to take a pay freeze until March 31, 2006, and will have to work two extra hours a month before they can earn overtime.

The maximum number of hours pilots can work per month including paid overtime was increased by up to three, while the starting salary for young pilots joining the airline was reduced by 7 percent.

Lufthansa agreed to include low-cost carrier Germanwings in the deal for its pilots. Germanwings is a subsidiary of Eurowings, which is 49 percent owned by Lufthansa.

Separately, Lufthansa's supervisory board has approved orders to buy seven long-haul A340-600 jets from Airbus.

The airline said in a statement that the A340-600 aircraft, scheduled for delivery in 2006 and 2007, will mainly replace its aircraft serving its profitable long-haul business.

It did not disclose the purchase price. Based on Airbus list price for 2004, the orders would be worth up to USD$1.5 billion. Lufthansa, which already has 10 of the type in its fleet, said the orders were included in its investment planning.

The airline said the orders were in line with its capacity planning for the Airbus A380, which will begin joining the fleet from the end of 2007.

(Reuters)