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Lufthansa pilots threatened to call further strikes this week after the latest stoppage in a dispute over retirement benefits grounded two-thirds of its flights on Tuesday.

Pilots began a strike at lunchtime on Monday on short haul flights and widened that to include lucrative long haul routes on Tuesday in a protest scheduled to end only late in the evening.

"We explicitly do not rule out further strikes this week if Lufthansa doesn't budge," Markus Wahl, a board member at union Vereinigung Cockpit, told Reuters.

The walkout has affected 166,000 passengers and forced the carrier to cancel more than 1,500 flights.

At Frankfurt airport, Lufthansa's main hub and Europe's third largest airport, queues snaked back from check-in desks, and staff were handing out drinks and snacks to those waiting.

The row is over proposed changes to an early retirement scheme for pilots that was developed decades ago, when they had to stop work at the age of 55.

The pilots want new starters at Europe's largest airline by revenue to retain the option of retiring at 55 and still getting a proportion of their pay. Lufthansa says the system is obsolete as pilots may now legally work until the age of 65.

Under Lufthansa's proposals, pilots would still be able to retire early, but the age would gradually increase to 60 from 55.

A spokesman for Lufthansa said the airline was standing by its last offer, made in September and which Lufthansa has described as the most generous in the industry worldwide.

"Strikes have never resolved a pay dispute," he said.

RISING COST

Lufthansa failed in an attempt to get a temporary injunction against the strikes after a labor court in Frankfurt said the strike was in compliance with the law.

The repeated strikes have led some analysts to question whether Lufthansa may have to revise its profit target for the second time this year. The airline is currently aiming for 1 billion euros ($1.3 billion) in 2014 operating profit.

Lufthansa has so far put the cost of the strikes this year, which include walkouts early in 2014 by security staff at Frankfurt airport, at around 70 million euros, but analysts estimate that figure could rise to around 100 million.

That compares with the 500 million euro hit that rival Air France expects to face from a two-week walkout by its pilots over plans to expand its low-cost operations.

Pilots are not the only ones striking in Germany, a country where such walkouts are relatively rare.

Train drivers represented by the GDL union have also held several strikes, including a 50-hour walkout over the weekend that stranded millions.

The strikes have thrown the focus on planned new legislation that could restrict the power of smaller unions.

Transport Minister Alexander Dobrindt said Europe's largest economy could suffer from worsening disruption to its vital transport network.

"This nervous system must not be paralyzed for a long time, a permanent blockade would greatly damage the economy," Dobrindt told best-selling tabloid Bild.

Thilo Heidrich, an economics analyst at Postbank, said the strikes so far should not have done much damage to the economy.

"But if we have a complete train strike lasting one, two or three days, then that could make its mark on the economy," he told Reuters.