FILE PHOTO: Southwest Airlines planes are seen at LAX airport in Los Angeles, California, United States, October 22, 2015. REUTERS/Lucy Nicholson

CHICAGO (Reuters) - A dispute with its mechanics union is costing Southwest Airlines Co millions of dollars in lost revenues a week as well as millions of dollars in costs related to flight cancellations and delays, chief executive Gary Kelly said on Tuesday.

Southwest and the Aircraft Mechanics Fraternal Association, which have been in contract negotiations since 2012, are locked in an escalating battle that last week saw the airline file a lawsuit asking a federal judge to intervene.

Kelly was speaking at a JPMorgan conference in New York, where he also said the airline could add 500 more Boeing Co 737 aircraft to its fleet as it considers adding new destinations in North and South America in coming years.

In a statement, the union - which represents more than 2,400 Southwest mechanics - disparaged Kelly’s comments as “a way to distract the public from Southwest’s own degrading safety standards.”

Dallas-based Southwest, one of the largest domestic U.S. carriers, has said it is committed to operating a safe fleet and that every maintenance report is investigated.

An unprecedented number of out-of-service aircraft in recent weeks at four of Southwest’s maintenance locations has forced the airline to delay or cancel hundreds of flights.

Southwest said on Monday that it will begin flying to Hawaii from California on March 17 as part of the budget-friendly carrier’s push to boost leisure travel from the West Coast.