TORONTO (AP) -- Air Canada started canceling flights on Thursday ahead of a possible work stoppage by flight attendants that could impact hundreds of thousands of travelers.

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 Wednesday. In response, the airline issued a lockout notice.

Mark Nasr, Chief Operations Officer for Air Canada, 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 flights that were due to depart Thursday night. "By tomorrow evening we expect to have cancelled flights affecting over 100,000 customers," Nasr said. "By the time we get to 1 a.m. 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 their latest offer includes a 38% 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 labor 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."

Natasha Stea, who represents flight attendants in Montreal for the union, said she thinks the airline is counting on the government to intervene. Stea said they want a fair and equitable contract.

"There is still time. I'm sure if we sat down and talked we could actually get to an agreement," she said.

The union rejected a proposal from the airline to enter a binding arbitration process, saying it prefers to negotiate a deal that its members can then vote on.

Meloul-Wechsler said they've hit an impasse but are still available for talks and consensual arbitration.

She said that if a deal isn't reached, the resulting "very serious disruptions" would prompt the company to consider asking for government intervention.

Federal Jobs Minister Patty Hajdu said she asked the union to respond to the airline's request for arbitration. She urged both sides to come to an agreement independently, saying she believes deals are best made at the bargaining table.