Cabin staff at Lufthansa said Wednesday they would cancel a planned strike against the German airline this week to allow for negotiations to resolve a protracted contract dispute.

Two weeks after mounting the longest strike in the company's history, the UFO flight attendants' union said it would call off industrial action scheduled for Thursday and Friday to hold further talks with management.

The German flag carrier said in a statement that the two sides had agreed on new ground rules in their dispute, including arbitration in the most contentious area of the negotiations: pay and retirement provisions.

"In this context, Lufthansa sees it as positive that UFO is prepared to contribute to reductions in gross personnel costs in the cabin," it said.

Lufthansa plans to hold a "jobs summit" on December 2 with UFO, the Cockpit pilots' union and the Verdi service sector union to hash out key problems in the long-running dispute.

UFO said that it would hold off on strikes until at least after the jobs summit.

The airline's management also hailed progress in talks this week with UFO on pensions which it said "could be the basis for an agreement".

This month UFO targeted Lufthansa with a week-long strike -- the worst in the airline's history with 4,700 flights scrapped and 550,000 passengers grounded.

The dispute erupted nearly two years ago when management sought to cut costs, saying the current retirement system was too expensive to maintain.

The union however wants the status quo to remain.

The conflict with cabin staff is separate from another long-running battle between management and pilots over the company's plans to change the pilots' early retirement arrangements.