"It's unrealistic to think mediation lasts less than six weeks," Baublies said.

Lufthansa (LHAG.DE) and union representatives on Friday agreed to begin a formal mediation procedure set for next Wednesday, after the airline offered permanent contracts to some temporary cabin crew. The concessions by Lufthansa have made finding a solution a lot easier, Baublies said.

If talks fail, further industrial action is possible, but this is not on the radar screen at the moment, Baublies said.

Both sides now need to agree on the appointment of an independent mediator, a step which the UFO union head hopes to be completed by mid next week.

Baublies declined to comment on media reports that former German president Horst Koehler, SPD politician Franz Muentefehring and constitutional judge Hans-Juergen Papier could be among the candidates to help with arbitration.

Potential candidates have not been contacted, Baublies said.

Previous talks broke down and strikes forced Lufthansa to cancel over 1,000 flights, after 13 months of negotiations over pay and working conditions.

Lufthansa has been resisting the union's demand for 5 percent pay increases and guarantees against outsourcing as it tries to slash costs in a plan to improve annual earnings by 1.5 billion euros by 2014. (Reporting by Joern Poltz; writing by Edward Taylor; Editing by Theodore d'Afflisio)

• A Permanent Economic Emergency