Swiss International Airlines has reached a last-minute deal with pilots of its regional fleet to avert possible strikes and redundancies.
Members of the Swiss Pilots union had been warned they would lose their jobs unless they signed new labour contracts by December 31.
Swiss and the pilots' union announced on Friday evening that they had agreed a deal after marathon talks.
"Following intensive discussions, the two parties today reached agreement on a memorandum of understanding in which they underscore their common commitment to a collaborative social partnership," the airline said in a statement.
It said the accord ensured Swiss Pilots would hand over the individual labour contracts to the regional carrier, Swiss European Airlines.
Under the agreement reached on Friday the pilots will receive more holidays, a pay increase and redundancy protection in 2006.
Swiss had threatened to sack pilots with Swiss European unless they signed individual labour agreements by Saturday. As of Friday around 80 per cent of the 300 pilots in question had refused to sign their contracts, handing these to the union instead of returning them to their employer.
The pilots had stated their intention to strike over what they described as a significant worsening of their working conditions.
Swiss Pilots, which represents pilots from the former regional carrier Crossair, opposed the individual contracts and sought instead a collective working agreement for its members.
In its statement, Swiss said the memorandum set the stage for a new collective working agreement. Both sides had agreed a timeframe for negotiations on the labour accord.
"The negotiations are to be concluded by the end of March and the new collective working agreement is to take effect on April 1, 2006," it said.
Talks between the union and Swiss began on Thursday night. On the same day Swiss said it would not renegotiate the individual contracts with pilots despite the threat of strikes from the start of 2006.
Swiss European came into operation on November 1. The conflict with the pilots was triggered by the airline's decision not to renew a collective working agreement, which expired at the end of October.
The new contracts were part of a restructuring plan by Swiss aimed at reducing costs after its takeover by German rival Lufthansa. Since its creation in 2002 Swiss has recorded losses of hundreds of millions of francs every year.
The group aims to break even for the first time next year, but still posted a first-half loss of SFr89 million ($67.78 million) in August.
swissinfo with agencies
Swiss European Airlines was cleared by the Federal Civil Aviation Office to start operations on November 1.
Swiss was formed in 2002 out of the merger of regional carrier Crossair and Swissair, which collapsed in 2001.
Swiss has been involved in disputes with former Crossair pilots who want the same pay and conditions as their ex-Swissair colleagues.
Lufthansa announced in March that it would take over Swiss.