The airline said last month it would launch a new cost-cutting program this year as high fuel prices, weak consumer confidence in Europe and additional charges from an EU emissions trading scheme conspire to make 2012 tough.
While rival Air France-KLM announced a pay freeze for French staff, German trade union ver.di is demanding a 6.1 percent pay increase for 50,000 Lufthansa employees in Germany for the next 12 months.
A ver.di spokeswoman also said the union rejected plans from Lufthansa for longer working hours.
Lufthansa, which has already said it will offer fewer seats next summer due to falling demand, said it made a counter offer to increase wages by 3.3 percent over a period of 15 months from Jan. 1, 2012.
The offer meant a 2.6 percent wage rise for a period of 12 months, ver.di said, adding the offer was tied to certain conditions that were not acceptable to the union.
"I am confident that every Lufthansa employee knows that the company must continue to develop and change," Lufthansa Chief Executive Christoph Franz was cited as saying in an employee magazine.
The full details of the cost-cutting programme are due to be announced in the first quarter.
Lufthansa has already angered unions by announcing plans to use temporary staff as cabin crew.
