Jetstar has revealed it will cut 10 per cent of its domestic flights in January to "avoid disrupting customers at short notice", as a wage dispute with its pilots and baggage handlers drags on.

Key points: Jetstar pilots say they will not be striking from December 20 to January 3

Jetstar pilots say they will not be striking from December 20 to January 3 The low-cost airline will try to move affected customers to Qantas flights

The low-cost airline will try to move affected customers to Qantas flights CEO Gareth Evans has accused unions of demanding 'unreasonable' pay rises

"Customers already booked on these flights will be contacted in coming days to be offered alternatives, including full refunds," Jetstar wrote in a statement on Monday.

The low-cost airline failed to resolve the dispute over the weekend, during which about 100 flights were cancelled.

The pilots will not be striking between December 20 and January 3, the Australian Federation of Air Pilots (AFAP) has confirmed.

Jetstar said the industrial action and flight cancellations would affect its earnings to the tune of $20 million to $25 million.

The company said it had an "extensive contingency" plan involving the use of third-party workers — instead of its own employees — to load bags and operate tugs.

It will also consolidate flights and transfer passengers to other airlines, including those with its parent company Qantas, "where feasible".

The airline said it employed about 830 pilots and 375 ground crew in Australia.

In addition, Jetstar said it planned to sell three of its Boeing 787-8 aircraft, which it said were serving "loss making and marginal" international routes, to offset the impact of the industrial action.

It expects to make a final decision on the aircraft sale by the first quarter of 2020.

Jetstar 'could have solved this issue by now'

Jetstar chief executive Gareth Evans apologised for the disruption to customers and blamed the Transport Workers Union (TWU) and AFAP for making "unsustainable" demands.

"In the case of the pilots, the union is asking for what amounts to a 15 per cent wage increase in the first year in a group where captains earn more than $300,000 a year," he said.

"For some groups, their salaries would increase by $60,000. We can't agree to that.

"There's no doubt that industrial action is expensive and frustrating, but we have to hold the line on costs or it threatens the long-term sustainability of our business."

But the pilots' union disputed that version of events and accused Mr Evans of "exaggerating".

"We are very frustrated by the exaggeration and misreporting from the company alleging that the cost is 15 per cent when it's simply untrue," AFAP's executive director Simon Lutton said.

"Jetstar AFAP-pilots have agreed [on] a 3 per cent wage increase. That's it, nothing more, nothing less."

"The ball is very much in Jetstar's court. They need to come back to the table, which they unilaterally left, and start negotiating in good faith."

The TWU said the baggage handlers were "struggling to pay bills and provide for their families" and were only making "modest" demands.

They are only seeking an extra 90 cents per hour, or $19 per week, said TWU national secretary Michael Kaine.

"The average guaranteed pay that a baggage and ramp worker gets is around $650 per week," the TWU said in a statement.

"Workers at most are guaranteed 30 hours per week, some are guaranteed as few as 20."

"With the money Jetstar is spending on cancelling flights and upsetting holiday plans, it could have solved this issue by now."

