Air Canada has started cancelling flights ahead of a possible work stoppage by flight attendants that could impact hundreds of thousands of travellers.

A complete shutdown of the country's largest airline threatens to impact about 130,000 people a day.

The union representing around 10,000 Air Canada flight attendants issued a 72-hour strike notice on Wednesday. In response, the airline issued a lockout notice.

Mark Nasr, chief operations officer, said the airline has begun a gradual suspension of Air Canada and Air Canada Rouge operations.

"All flights will be paused by Saturday early morning," he said.

Nasr said this approach will help facilitate an orderly restart "which under the best circumstances will take a full week to complete".

He said a first set of cancellations involving several dozen flights will impact long-haul overseas trips that were due to depart on Thursday night.

"By tomorrow evening we expect to have cancelled flights affecting over 100,000 customers," Nasr said.

"By the time we get to 1am on Saturday morning we will be completely grounded."

He said a grounding will affect 25,000 Canadians a day abroad who may become stranded. They expect 500 flights to be cancelled by the end of Friday.

He said customers whose flights are cancelled will be eligible for a full refund, and it has also made arrangements with other Canadian and foreign carriers to provide alternative travel options "to the extent possible".

Arielle Meloul-Wechsler, head of human resources for Air Canada, said its latest offer includes a 38 percent increase in total compensation including benefits and pensions over four years.

The union has said its main sticking points revolve around what it calls flight attendants’ "poverty wages" and unpaid labour when planes aren't in the air.

Some flight attendants at the airline's news conference on Thursday held up signs that read "Unpaid work won't fly" and "Poverty wages = UnCanadian".

Canadian Jobs Minister Patty Hajdu on Thursday urged the airline and the union to come back to the bargaining table.

In a statement, Hajdu also said Air Canada had asked her to refer the dispute to binding arbitration. She said she had asked the union to respond to this request. (AP/Reuters)