German pilots' union makes new proposals to end row with Lufthansa

* Pilots' union VC proposes raising average retirement age to 60

* VC offers to cut cockpit crew costs on tourist routes

* Union proposes Eurowings' pay be based on that of rivals (Adds more details of proposals, Lufthansa response, background on dispute)

BERLIN, July 24 (Reuters) - German pilots union Vereinigung Cockpit (VC) offered concessions on Friday in a bid to end a long-running pay dispute at Lufthansa, including agreeing to an increase in the average retirement age and lowering costs.

Lufthansa pilots have staged more than a dozen strikes since April last year, costing the airline hundreds of millions of euros, to protest plans by management to change retirement benefits and lower costs via expansion of a new budget carrier, Eurowings.

The airline is grappling with an increased pension deficit against the backdrop of low interest rates, and says it needs to cut costs to halt a loss of market share to low-cost carriers in Europe and more nimble competitors such as Turkish Airlines and Emirates on long-haul routes.

VC proposed on Friday increasing pilots' average retirement age to 60 from 58, not 61 as Lufthansa had wanted, and conducting a market study to base a pay deal for pilots at Eurowings on that of rival budget carriers easyJet, for short-haul routes, and Condor, for long-haul routes.

It also offered to reduce cockpit crew costs by 20 percent on long-haul Lufthansa routes to certain tourist destinations, where the airline can't rely on demand from business class passengers to keep such routes profitable.

"It's finally time to hold talks and find a solution," union spokesman Markus Wahl told Reuters. "I think we're making significant overtures towards Lufthansa management."

The union's offer came after attempts to take the dispute to mediation failed earlier this month, raising the prospect of more strikes. VC said it hoped a deal could be reached by Sept. 1.

Lufthansa welcomed VC's offer and a spokesman said it would suggest a date for talks once it had reviewed the proposals.

The proposals are along the lines of a pact for growth and employment that Lufthansa proposed in February, in which it offered to grow fleet and staff numbers at its main brand in exchange for cost cuts.

However, the union wants Eurowings to be based in Germany, and not Austria, as Lufthansa Chief Executive Carsten Spohr is planning, so that new pilots can also join German collective labour agreements.

"They (VC) effectively want Eurowings to be part of the lofty Lufthansa pay deals. This could be a sticking point in the negotiations," Equinet analyst Jochen Rothenbacher told Reuters.

Rival Air France-KLM (Shanghai: 600686.SS - news) is also battling high labour costs and said on Friday it would cut long-haul routes if a deal wasn't reached with Air France (Paris: FR0000031122 - news) pilots to reduce costs.

The Lufthansa dispute centred around early retirement provisions for pilots, which the airline wanted to scrap. Plans by Spohr, who took over as chief executive last year, to expand Eurowings into a low-cost carrier escalated the dispute, because the pilots feared it could erode jobs at Lufthansa's main brand. (Reporting by Victoria Bryan; Additional reporting by Klaus Lauer; Editing by Christoph Steitz and Susan Fenton)