Lufthansa said that the deal, which would include a code-sharing agreement and cooperation on frequent flyer programs, would help the German airline to expand its operations in Russia.

The deal with AirUnion followed a meeting in Moscow between Lufthansa chief Wolfgang Mayrhuber and Russian businessman Boris Abramovich, a key shareholder in the Russian airline.

"Russia is an important destination for our customers," Mayrhuber said.

Carrying 4.9 million passengers last year, AirUnion is Russia's second-biggest airline after Aeroflot, which carried 8.75 million people, and was formed following a merger of five regional airlines including KrasAir, Domodedovo Airlines, Omskavia, Samara and Sibaviatrans.

Lufthansa had in recent years attempted to reach a cooperation arrangement with Aeroflot, but other international contracts kept a deal from being reached as Lufthansa is a leading member of the Star Alliance group while Aeroflot signed on with the Sky Team, led by Air France.

Lufthansa also announced Tuesday that its global traffic figures had hit a record level in the first half of 2007 of about 27 million passengers.

This represented a 5.9 percent increase during the first six months of the year compared to the same period in 2005.