Lufthansa and its pilots’ union have reached a wide-ranging agreement on pay, pensions and working practices, bringing an end to years of wrangling and strikes and boosting shares in the German group.

The airline and its other full-service rivals have long been seeking ways to bring pilot costs down as they vie with younger, leaner Gulf carriers on long-haul routes and fast-growing low-cost rivals on short-haul routes.

However, Lufthansa’s efforts to overhaul its labour agreement with the Vereinigung Cockpit union, which represents about 5,400 pilots at its Lufthansa, Germanwings and Cargo units, had led to repeated strikes.

The agreement announced by the two sides yesterday includes a 10-year pay deal, a shift from defined benefit to defined contribution pensions and more flexible working hours, in exchange for giving pilots working for the main airline more job opportunities.

The pilots will receive a pay increase amounting to an 11.4 per cent rise for the period between May 2012, when the last collective contract expired, until June 2022, plus a one-off payment equivalent to 1.8 times the monthly salary.

Lufthansa pilots are well paid by industry standards. A pilot at Lufthansa earns on average €180,000 a year before tax, though a captain on the highest pay level can earn as much as €22,000 a month before tax.

The new deal promises to remove the risk of any pilot strikes over pay until 2022 and the union said it would result in an average 15 per cent reduction in the airline’s pilot costs.

The deal means Lufthansa will follow rival IAG, which owns British Airways, Iberia and Aer Lingus, in making progress in bringing costs down at its main brand.

The company is due to provide more details and give a profit forecast for 2017 when it reports annual results today.

It said yesterday the agreement on pensions and early retirement payments would boost its profit in 2017 and reduce pension liabilities by an amount in the high hundreds of millions of euros. (Reuters)