Lufthansa has ended a run of strikes which had led to the cancellation of more than 1,000 flights after conceding to a key demand by organised labour.
Both sides have agreed to seek arbitration next week.
"We hope that this step will help UFO to join us in constructive talks to come up with a competitive pay structure for cabin crew," Lufthansa Chief Executive Christoph Franz said in a statement.
The concession to offer permanent contracts to some temporary cabin crew came after both sides agreed to meet for talks as the third strike in eight days and the biggest to date brought fresh disruption across Germany.
Indeed, Franz's gamble may have paid off. The cabin crew union, UFO, agreed later today to mediation and pledged not to disrupt passengers any further with walk-outs.
"Starting tomorrow, there will no longer be any strikes until we agree to or reject an arbiter's ruling," UFO union boss Nicoley Baublies told reporters in Frankfurt.
He had earlier said UFO was not planning any further strikes beyond today and that he wanted to try to end what he described as "trench warfare."
In a statement , Lufthansa said a mediation contract would be signed on Wednesday with the aim of agreeing on an arbiter by the end of next week.
Lufthansa has been resisting UFO's demands for 5% pay increases and guarantees against outsourcing as it tries to slash costs in a plan to improve annual earnings by €1.5bn ($1.9 billion) by 2014.
The airline said it would stop using flight attendants employed on temporary contracts at a separate agency for its Berlin operations and offer them permanent jobs within the Lufthansa group next year.
Lufthansa had started using the workers - who work longer hours on a more flexible basis - a few months ago. UFO had tried to appeal the plans but a German court backed the airline this year in its use of such contracts, which are common in the car industry.
