Lufthansa reached a pay deal with cabin crew guaranteeing more than 14,000 jobs in return for increased flexibility and productivity, the UFO union and the airline said on Monday.

Wages for the employees will be linked to the company's earnings performance this year and next, while salaries will rise at least 2.5 percent from January 1, 2007, the union said in a statement.

Lufthansa said there would be a pay freeze this year and next and that none of the cabin crew jobs would be cut before the end of 2008.

The airline said the agreement would enable it to cut costs by a combined EUR40 million (USD$51.5 million) this year and next and EUR30 million (USD$38.6 million) annually from 2007.

The deal comes five months after Lufthansa reached agreements for 4,400 pilots with the Vereinigung Cockpit union and for 37,000 ground staff with the Verdi union and it marks the end of a mammoth round of talks that began in the autumn of 2003.

The airline is trying to reduce overall costs by EUR1.2 billion (USD$1.54 billion) by 2006, including a EUR300 million (USD$385.9 million) cut in staff costs.

Lufthansa has said the ground personnel agreement would save it EUR150 million (USD$192.9 million) by 2006, while the pilots' accord would result in EUR55 million (USD$70.7 million) of savings, bringing a total of EUR245 million (USD$315.2 million) over the two-year period, including the UFO deal.

"The difficult situation in our industry, with high energy prices and aggressive competitors, will continue to require us to improve our costs and productivity in all areas of the company," said airline personnel chief Stefan Lauer.

Lufthansa will also create 1,000 more jobs for cabin staff in coming years, boosted by the arrival of the Airbus A380 superjumbo in its fleet from 2007, the UFO union said.

"UFO has succeeded in linking the effects of the globalization of air travel and the recently begun consolidation in the European air transport industry with the legitimate interests of the workers," UFO said.