Lufthansa made a key concession in talks with unions on Friday, and both sides agreed to a mediator, as a 24-hour walkout that grounded half the airline's flights in Germany entered its final hours.
Europe's biggest airline agreed not to employ in Berlin cheap contract workers as cabin crew, meeting a key union demand, as the industrial action over pay and conditions grounded 900 flights.
"Unilaterally, until further notice and without further preconditions, Lufthansa renounces the employment of external cabin crews" hired in the German capital, the airline's chief executive Christoph Franz said.
Flight attendants of temporary employment agency Aviation Power employed by the airline, "will be offered a full-time position with the Lufthansa group next year", the company said.
A management statement called the decision "a huge step".
Management and UFO, the Independent Flight Attendants' Organisation, also agreed that a mediator would help end the conflict over pay to allow them to sign new wage agreements for cabin crews by Wednesday.
Until the arbitration decision is made, there will be no more walkouts from Saturday, said Lufthansa on Friday night.
The latest strike began at midnight (2200 GMT Thursday) and so far "more than 100,000 passengers are affected", a Lufthansa spokesman said earlier, adding that around half the airline's 1,800 daily flights had been cancelled.
Frankfurt airport, Lufthansa's main hub and Europe's third-busiest airport, was "most affected".
But chaos had been averted because the airline had informed passengers beforehand about cancellations via text messages, and it had also posted information on its website, a spokesman said.
"Lufthansa seems to have been better prepared this time round," said UFO chief Nicoley Baublies.
The union, which described strike participation as "very high", claims it is the biggest strike in Lufthansa's history, but the airline itself refused to comment on the scope of the stoppage.
The Lufthansa spokesman said "all German regions and all types of flights are affected", including long-haul flights which in the past strikes were the least disturbed.
The company had been expecting to cancel 1,200 flights, or two-thirds of the daily total, as a result of Friday's action.
Already on Thursday, the carrier had cancelled around 50 flights ahead of the planned walkout by cabin crew at six major airports.
And the Lufthansa spokesman said that around 13 flights were also expected to be cancelled on Saturday due to the knock-on effects.
The 24-hour stoppage at the airports of Frankfurt, Berlin, Hamburg, Munich, Duesseldorf and Stuttgart was called late Wednesday, as unions stepped up pressure in their pay dispute.
Other shorter walkouts of eight hours last week and earlier this week had grounded hundreds of flights and affected thousands of passengers.
Interviewed by ZDF television, airline's chief executive Franz acknowledged that he had "not anticipated a movement of this scale" but described it as "disproportionate".
According to its latest demands, the union -- which represents some two-thirds of Lufthansa's 18,000 cabin crew -- is seeking a five-percent pay increase backdated to April after three years of wage freezes.
A 2009 strike by cabin crew cost Lufthansa tens of millions of euros.
In February, Frankfurt airport's apron control staff -- traffic controllers who guide aircraft on the tarmac -- walked off the job over demands for higher pay.
According to Peter Oppitzhauser, an analyst at Credit Agricole Chevreux quoted by Dow Jones Newswires, the first two days of walkouts have already knocked 2.0 percent off Lufthansa's annual operating result, which is seen at around 500 million euros this year.