A crowd of nearly 150 people gathered outside Delhi's Indira Gandhi International airport (terminal 3) early Friday morning, demanding either a full refund or tickets on alternate flights after German airline Lufthansa cancelled hundreds of flights, including two Frankfurt-bound services from India, due to a union strike that began at midnight.

Lufthansa is expected to cancel as many as 800 flights scheduled for today and as many as 1.3 lakh passengers are likely to be affected.

The airline has acknowledged that the strike will have a significant impact on flight operations and that passengers will be affected when tens of thousands of people return home from their summer holidays in European countries.

The strike is a one-day protest by the pilots' union Vereinigung Cockpit, which has demanded a 5.5 per cent pay hike for 5,000+ members and automatic inflation compensation.

"We hope to get back to negotiations as soon as possible," a Lufthansa spokesperson said on Thursday, "However, we cannot bear cost increases associated with VC's demands either."

The airlines defended its position saying it had presented an offer with an 18-month term - under which Lufthansa and Lufthansa Cargo pilots will receive 900 euros more in basic pay per month in two stages. The company said this would benefit entry-level salaries in particular.