BA said it had canceled all flights using Britain's biggest airport until at least 8 p.m. (1900 GMT), extending a previous suspension by two hours.

In the first sign of possible break-through, BA said around two-thirds of the 1,000 staff who walked out Thursday in support of workers sacked at a catering supplier were returning to work.

"What we can't say yet is what that is going to mean for our operation," a spokeswoman for the airline told Reuters.

"We have got 1,000 staff and 100 aircraft currently out of place so we still need to make a decision on our operation and will provide an update in the next couple of hours," she said.

Arbitrator ACAS said it would hold talks on Friday with the union and the catering supplier, Gate Gourmet.

BA Chief Executive Rod Eddington said it was "regrettable in the extreme" that the cancellations had to be extended.

"This is not our dispute. Our customers come first and everyone involved in creating this unofficial situation must come to their senses," he said in a statement.

Around 100,000 passengers fly daily with BA during August, and about two-thirds of its flights, excluding franchises, use Heathrow, the world's busiest international hub.

Analysts said the cancellations could cost Europe's No. 3 airline tens of millions of pounds.

Shares in BA, already suffering from record oil prices and competition from low-cost carriers, fell as much as 2.5 percent in early trade. At 1450 GMT, they were down 1 percent at 289-1/4 pence, among the worst performing in the FTSE-100 index.

BA said it had found 4,000 hotel rooms for passengers stranded overnight and that 1,600 spent the night at the airport. Customers could rebook flights or be refunded, and were being offered free refreshments at Heathrow, Richard Goodfellow said.

"Our message to customers is don't come to the airport today ... We're very sorry and doing all we can to look after customers at Heathrow," he said.

However, around 1,000 passengers queuing to swap tickets or get refunds at a packed Terminal 4 were not impressed.

"We're feeling very frustrated. It's totally chaotic," said Zelko Marusic, who arrived from Seattle on Thursday and is trying to travel to Vienna. "We had two hours sleep and no one's telling us what's happening."

BA staff still working were also having a torrid time.

"It's a very, very difficult day. I keep being shouted at, so it's not much fun," said one, who declined to be named.

Unofficial strikes in 2003 cost BA around 40 million pounds, and analysts said the firm was getting a reputation for letting down customers.

"Financially people are talking 10 million pounds a day in the short-term, but obviously longer-term there's the hit it takes in terms of customers and how it's perceived by clients," said Henk Potts, an investment manager at Barclays Stockbrokers.

BA said it was too early to estimate the cost of the strike.

Other airlines faced knock-on disruption. Australia's Qantas Airways Ltd. said it had cancelled flights, while Finnish national carrier Finnair and Sri Lankan Airlines were also affected.

BA said about 620 flights had been cancelled since Thursday.

BA's relations with staff have been strained since the airline axed thousands of jobs in an industry downturn that followed the September 2001 attacks on the United States.

The latest dispute was triggered by a long-running spat between the TGWU and loss-making Gate Gourmet, which is owned by US private equity fund Texas Pacific.

Unions said Gate Gourmet staff were sacked after they walked out in protest at planned changes to pay and conditions. The company said its reforms were needed to safeguard its future.