Pilots, worried Transavia would suck away jobs and erode their pay and conditions, began their strike on Sept. 15, forcing Air France to cancel hundreds of flights.
The company says the dispute has cost it up to 20 million euros ($25.70 million) a day and has come under political pressure within France to make concessions.
The airline said in a statement that it proposed the immediate withdrawal of the Transavia Europe project in order to end the conflict quickly.
"This proposition addresses the concerns of the social partners and brings a new guarantee that there will be no delocalisation (of jobs)," the statement said.
The pilots fear that plans to shift part of Transavia operations to cheaper European hubs would erode their pay and conditions. Unions had threatened to prolong the walkout indefinitely if management pressed ahead with the strategy.
The French state has a 16 percent stake in parent group Air France-KLM
Air France-KLM's head Alexandre de Juniac has said the expansion drive for Transavia was crucial to fight competition from other low-cost players across Europe.
Shares in Air France-KLM closed 1.05 percent higher on Wednesday. The stock is down about 10 percent since the strike began and virtually unchanged since the start of the year.-Reuters