UPDATE 1-Strike of German air traffic controllers averted

Wed Oct 12, 2011 12:09pm EDT

* DFS authority agrees to 5.2 percent pay increase

* Some employees to be moved up pay scale

* Lufthansa, Fraport, Air Berlin shares up (Adds background, comments)

By Victoria Bryan and Peter Maushagen

FRANKFURT, Oct 12 (Reuters) - The German air traffic control authority has reached a deal on pay and conditions with the GdF union, thus averting a strike that would have disrupted thousands of flights across Europe.

The DFS authority said on Wednesday it had agreed to increase pay by a total 5.2 percent in two stages over a 17 month period, while certain employees would be moved up the pay scale, thus receiving a further increase.

The GdF union, which had wanted a 6.5 percent rise, confirmed that a deal had been reached.

In total, the measures will increase the DFS' labour costs by around 9 percent, it said.

The authority described the deal as "a major financial burden" but said it wished to reach an agreement in the interests of customers and passengers.

The wrangling over pay and conditions has been going on since the start of the year and intensified when the union threatened to strike twice in August during the busy summer holiday period.

Those strikes were averted by court action and a last-minute agreement by the DFS to enter mediation.

The final round of talks, which were held on Wednesday near Germany's largest airport in Frankfurt, had been called at the behest of the German government, which controls the DFS, after mediation talks broke down last week.

Shares in Air Berlin closed up 5 percent, while shares in Lufthansa and Frankfurt airport operator Fraport were up 2 percent and 3.3 percent, respectively.

Around 6,000 people work for the DFS, coordinating up to 10,000 flight movements in German airspace a day, the authority said. (Reporting by Victoria Bryan, Peter Maushagen and Christoph Steitz; Editing by Elaine Hardcastle)