* Laudamotion to hand back Airbus planes until end-June
* London court hearing avoided by the agreement
* Laudamotion will double Airbus fleet until summer (Adds quotes from Laudamotion, plane order, background)
VIENNA, Oct 9 (Reuters) - Lufthansa and Ryanair-backed carrier Laudamotion settled a dispute over leasing contracts, avoiding a London court hearing that was scheduled for November, both airlines said on Tuesday.
The German flagship carrier said in July it wanted to end an agreement to lease planes to Laudamotion, claiming the Austrian leisure airline had failed to meet payments. A London court was scheduled to start proceedings in the case next month, as Laudamotion rejected the allegations.
To resolve the row, the Austrian group would return the nine aircraft, which it leased from Lufthansa, during the first half of 2019, Laudamotion and Lufthansa said in a statement.
"On that basis the parties have settled the litigation between them," they said. "The matter will not therefore be heard by the High Court in London in November 2018."
The dispute highlighted the battle for market share in Germany and Austria after the collapse of Air Berlin as the European aviation market has become highly competitive with low cost carriers increasingly taking passengers from flagship airlines.
Laudamotion was formed by former Formula One ace Niki Lauda out of the Austrian Niki unit of former Air Berlin this year. Ryanair agreed to take a majority stake in the leisure airline soon after, attempting to challenge Lufthansa on its home turf.
Laudamotion will not suffer any shortage of planes despite returning some aircraft because it will double its current Airbus fleet instead. It has ordered 18 Airbus A320 aircraft to be delivered successively until summer 2019, a spokeswoman said.
The move to buy 75 percent of the small Austrian carrier, at which Niki Lauda still has the helm, adds Airbus planes to Ryanair's fleet for the first time. Europe's biggest low cost carrier operates more than 400 Boeings.
Laudamotion now flies 10 Boeing 737 jets from Ryanair in addition to its Airbus jets. It planned to reduce that to six by summer next year, the spokeswoman said, in line with Ryanair CEO Michael O'Leary's target of not having Laudamotion operating a mixed Boeing-Airbus fleet.
O'Leary said in March he had harboured aspirations to develop an Airbus fleet at Ryanair for "some years", but relations with the European planemaker have been strained. (Reporting by Kirsti Knolle Editing by Susan Fenton and Edmund Blair)