Deutsche Lufthansa AG has canceled thousands of its flight at the beginning of a strike of three days by its pilots that is set to create the worst disruption in the history of the airline amidst a campaign that slashes costs in order to remain competitive.

Close to 3,315 services have been suspended up to April 4, as only 500 flights have been kept open according to officials at Lufthansa, which advised customers to switch travel plans to rail or rebook.

The company, based in Frankfurt, is currently negotiating with its 5,400 pilots over a dispute in retirement benefits.

The second largest European carrier has endured a number of labor disputes amongst aircrew, flight attendants and ground staff in the last few years while seeking to match the lower cost base of British Airways and Gulf rivals.

This has complicated the challenges facing Carsten Spohr the income CEO who is also a reserve pilot. The company has put the cost of the walkout this week at over $69 million.

Industry analysts said that the negotiations would not be easy. While Lufthansa has tied the plans of cost cutting to helping to fund 300 new aircraft and create jobs for new pilots, unions criticize the airline for announcing a dividend payment reinstatement while continuing to cut benefits to employees.

One pilot said that the airline earned good money, and the pilots just want to negotiate the amount that investors get and how much is needed to satisfy the customer and how much is needed by the employees.

He said the only way to make the airline move in the negotiations is to strike.

A pilot with Lufthansa previously could retire at the age of 55, with the airline paying transitional benefits of up to 60% of the last salary while the pilot waits to reach 63 the legal age of retirement.

Lufthansa cancelled that contract in the end of 2013 after some of the pilots demanded the right to work longer.

While pilots are striking solely because of the scrapping of their transitional benefits, they are also seeking an increase in wages of 10%.