Jan. 29 (Bloomberg) -- British Airways Plc averted a strike by flight attendants, reaching an agreement on pay and sick leave 10 hours before the two-day walkout was due to start.

British Airways, which had canceled 1,300 flights in preparation for the strike, said all long-haul routes and some short-haul flights will be restored. The carrier said it will increase pay for cabin crew by 4.6 percent this year.

``Unfortunately, the decision has come too late to prevent disruption to the travel plans of tens of thousands of our customers tomorrow and Wednesday,'' Chief Executive Officer Willie Walsh said in a statement today. ``We will endeavor to reinstate as many flights as we can for those days. We will give more details later today.''

Cabin crew members voted Jan. 15 to strike after objecting to reductions in sick leave and the number of attendants on planes. The cuts were part of Walsh's plan to save 50 million pounds ($98 million) in costs. Walsh directed passengers to check the airline's Web site later today for flights that had been reinstated.

``It's a positive outcome to get the issues resolved and remove the uncertainty from the stock,'' Penny Butcher, an analyst with Morgan Stanley in London who has an ``equal-weight'' rating on the shares, said. ``And to avoid the strike altogether, makes the market pretty happy.''

Shares of London-based British Airways rose 14.5 pence, or 2.8 percent, to 542 pence in London. The stock has almost doubled since Walsh succeeded Rod Eddington as chief executive in October 2005.

Labor Talks

Negotiations between Transport & General Workers Union General Secretary Tony Woodley and Walsh resumed today after the two met on both days of the weekend. Woodley said the airline and union reached a wide-ranging deal that included an agreement on pensions and ``ended the two-tier wage structure in this company.''

Under the agreement, the top base pay of flight attendants hired after 1997 will be increased to 19,418 pounds a year from 15,748 pounds. These employees have been paid less than workers with longer service.

The carrier has faced a series of disruptions in the past year, including union rejection of its pension proposal, security alerts at London's Heathrow airport and foggy weather. The settlement may clear the way for Walsh to continue trimming costs at the airline. The carrier still needs to solve a 2.1 billion- pound pension deficit before it can upgrade its fleet with more fuel-efficient airplanes.

Cutting Sick Leave

Walsh cut sick leave for cabin crew members to 12 days from 25 days a year. The average sick leave for flight attendants at Ryanair Holdings Plc, Europe's largest discount carrier, is three days, according to Chief Executive Officer Michael O'Leary. The U.K. national average is seven.

Walsh said today's agreement ``puts in place a system to regulate how we manage sick leave.'' He provided no specifics.

British Airways needs its four main unions to agree to its pension proposal. Amicus and the British Airlines Pilot Association have voted to recommend the proposal to their members. The GMB union, which includes baggage handlers and ground staff, rejected the plan on Jan. 12.

The T&G had planned to strike for three days starting on Jan. 29, with two more three-day strikes in February. It called off the first 24 hours of the walkout to allow more time for negotiations.

The dispute between British Airways and its cabin crew members had been simmering since November. Flight attendants agreed to the current sick leave policy in 2005. More than a quarter of cabin crew absences, arising from conditions including stomach upsets and ear infections, are exempt from the paid sick-leave limit.

Exempt Illness

The union requested that additional ailments be exempted. These include cold sores, conjunctivitis and in-grown toenails. Excluding such conditions would cost the airline 3.25 million pounds a year, British Airways said.

The union also asked British Airways to cancel its plans to cut the number of senior flight attendants on planes and revise its pay scales for cabin crew members hired after 1997. Many of the 5,000 flight attendants hired after 1997 have now reached the top of their pay scale, and senior staff cuts will hinder promotions, the union said.

To contact the reporters on this story: Tracy Alloway in London at talloway@bloomberg.net; Chad Thomas in London at cthomas16@bloomberg.net.

Last Updated: January 29, 2007 12:45 EST